How Ford Created America's Car Culture and Altria Built a Consumer Empire
On this day in economic and business history...
The first Ford Model T, after a month and a half in production, rolled out of the company's Piquette Avenue plant in Detroit on Sept. 27, 1908. It would be revealed to the public on Oct. 1. More than any other vehicle in automotive history, this was the car that put America on wheels. At a time when the average car cost roughly $1,300, Ford used standardized manufacturing techniques to build a "car for the masses" that cost just $850. As a result, Ford shot to the top of the sales charts -- the company made nearly 18,000 of the 124,000 automobiles sold in 1909, and the vast majority of these were Model Ts. The car proved so popular that Ford opened a Model T assembly plant in Britain within a year of its introduction in the United States.
Demand for the Model T also led Ford to develop the modern assembly line, which was put into action five years after the first "Tin Lizzie" sputtered down Piquette Avenue. That technology brought production time on the Model T down from 12.5 hours in 1908 to just 93 minutes by 1914, an 88% reduction in manufacturing time per vehicle. Sales exploded, and in its first full year of assembly line production, the Model T found more than 300,000 buyers. A year later, Ford's sales leapt again to more than 500,000 cars, in excess of half of all automobiles sold in the United States at the time. One year after that, the price of a Model T had plummeted to $360. This low base price encouraged aftermarket modifications, and as The New York Times' Lindsay Brooke pointed out, this was a popular pastime:
Nearly as significant as the Model T's ubiquity was its knack for performing tasks far beyond basic transportation. As quickly as customers left the dealers' lot, they began transforming their Ts to suit their specialized needs, assisted by scores of new companies that sprang up to cater exclusively to the world's most popular car.
Following the Model T's skyrocketing success came mail-order catalogs and magazine advertisements filled with parts and kits to turn the humble Fords into farm tractors, mobile sawmills, snowmobiles, racy roadsters and even semi-trucks. Indeed, historians credit the Model T -- which Ford first advertised as The Universal Car -- with launching today's multibillion-dollar automotive aftermarket industry.
More than 15 million Model Ts would be built by 1927. The enormous success of the Tin Lizzie made Ford a billionaire and helped develop an American consumer culture. By the end of the Roaring '20s, there were 23.1 million registered vehicles on American roads -- even if only 80% of all Model Ts built survived in active use to that point, then more than half of all registered vehicles would have been Model Ts.
A major acquisition
Philip Morris, now Altria , agreed to buy General Foods on Sept. 27, 1985 for $120 per share in a $5.6 billion acquisition. At the time, it was the costliest non-oil merger in history, and it created the largest consumer-products company in the United States.
General Foods was already a packaged-foods behemoth, well-known for products including Jell-O and Maxwell House Coffee. In fact, this merger appears to be the only occasion when a company bought its way onto the Dow Jones Industrial Average -- General Foods had been a member of the index for 57 years by 1985, and Altria replaced it roughly a month after making the acquisition offer.
General Foods' path to Dow membership and supermarket dominance begins, oddly enough, in John Harvey Kellogg's Battle Creek Sanitarium. General Foods founder C. W. Post, after his stay in the sanitarium, found inspiration in Kellogg's food-based treatments to create a grain-based coffee substitute called Postum. The core of General Foods was for many years the Postum cereal company, which remained with Altria through its acquisitions of Kraft in 1988 (which set a new high water mark for consumer-products mergers at nearly $13 billion) and Nabisco's cereal brands in 1993.
Altria combined General Foods with Kraft following the 1988 acquisition, and maintained ownership of the enhanced Kraft until divesting itself of the packaged-foods company in a 2007 spinoff valued at about $46.1 billion. Altria lost its spot on the Dow shortly after this divestiture, ending an eight-decade streak of index membership for the makers of Post cereals. Kraft divested Post Cereals shortly after its own divestiture from Altria, and the company became an independent publicly traded company again in 2012, marking the first time the Post (or Postum) name had been used as an independent corporate identity since 1929.
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The article How Ford Created America's Car Culture and Altria Built a Consumer Empire originally appeared on Fool.com.
Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter @TMFBiggles for more insight into markets, history, and technology.The Motley Fool recommends Ford. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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