Henry Ford's Big Breakthrough
On this day in economic and business history...
Henry Ford had a dream: to build a car "for the great multitude." That dream took form in 1908 with the construction of the Model T, but Ford could only advance vehicle construction techniques so far while still relying on his workers to move from place to place to complete each car. His great breakthrough, first installed at the gleaming new Highland Park plant on the outskirts of Detroit, was the moving assembly line, which became operational on Oct. 7, 1913. Ford's historic archives recount the company's path toward developing this solution:
At first, cars were mounted on movable benches or "cradles" that were pushed from one workstation to the next, where parts were attached. Ford workers then tried moving parts along the production line on inclined slides. This speeded up the production, but the cars were still largely handmade.
A breakthrough came in April 1913. A production engineer in the flywheel magneto assembly area tried a new way to put this component's parts together. The operation was divided into 29 separate steps. Workers placed only one part in the assembly before pushing the flywheel down the line to the next employee.
Previously, it had taken one employee about 20 minutes to assemble a flywheel magneto. Divided among 29 men, the job took 13 minutes. It was eventually trimmed to five minutes. This approach was applied gradually to the construction of the engine and other parts.
On October 7, 1913, a rudimentary final assembly line was rigged at the new Highland Park plant. A chassis was pulled slowly across the factory floor by rope and windlass. Parts and 140 assemblers were stationed along the 150-foot line. As the winch dragged the chassis across the floor, workers attached parts to the car. With this new assembly line, production time for a single vehicle fell from 12 hours and 30 minutes to five hours and 50 minutes.
Soon the line was improved with a power-drive "endless" conveyor system that was flush with the floor and wide enough to accommodate the chassis with room for workers on both sides. By 1914, continuous improvement had whittled the time required for assembly to 93 minutes.
This was not the first use of assembly-line concepts. Ransom Olds, who built the first successful mass-produced car, implemented an earlier form of the assembly line that allowed him to build thousands of "Oldsmobiles" years before Ford completed his first Model T. Olds even gained a patent on the concept. But Ford's inspiration was found primarily in Chicago's meatpacking industry, which used a similar moving-conveyor (dis)assembly line in slaughterhouses to carry animal carcasses on hooks from station to station, a link confirmed in Ford's ghostwritten 1922 autobiography. It was the use of these moving conveyors that set Ford apart from Olds and other early experimenters and established the Ford assembly process as the auto industry's gold standard.
Early Model Ts had taken 12 hours to build, so a reduction to 93 minutes was substantial, to say the least. As production soared, the car's retail price plunged from about $850 in 1908 to $290 in 1925, shortly before the model was permanently retired. In real terms, this is akin to an 82% reduction in price -- 1908's Model T would have cost $21,800 when adjusted for inflation, but the 1925 model was a mere $3,900 when new! It truly was a car for the great multitude, thanks to the efficiency improvements wrought by the assembly line.
Ford's annual production soared, but so did that of the rest of the industry as it raced to catch up with the Model T's stunning popularity. Ford had built just 10,202 cars in 1908, but the company reached a pre-Depression production peak of 1,831,128 cars in 1923. By comparison, General Motors , the second-place automaker throughout most of the pre-Depression era, produced only 795,555 vehicles that year across a range of brands.
General Motors was not even established until the fall of 1908, and its flagship Chevrolet brand wasn't created until 1911 (it was independent until 1918), but the separation between the two companies following Ford's early use of the assembly line was quite stark. Between 1911 and 1915, Chevrolet produced roughly 16,000 cars. By the end of 1915, Ford was building 16,000 cars every two weeks. It was not until Ford finally ceased production of the Model T in 1927 that General Motors finally squeaked into the vehicle-sales lead. By that point, more than 15 million Tin Lizzies had been built -- one for every other household in the U.S.
Your daily Dow
The Dow Jones Industrial Average was born in May of 1896, but it would be four more months before the new market index found a regular permanent home. The Dow began appearing daily in The Wall Street Journal on Oct. 7, 1896, when its value was a mere 35.3. By this point, the index had already made its first component swap -- the North American Company, a conglomerate with diverse assets, was removed in favor of the preferred shares of U.S. Cordage, a rope maker that would only last three months on the Dow, about the same length of time as its predecessor. The Dow, comfortably into its second century of continuous publication, has now provided readers of The Wall Street Journal with nearly 30,000 consecutive trading days of information on the market's movements.
The Next Big Industrial Breakthrough
Henry Ford helped propel the Industrial Revolution to its greatest heights a century ago, but globalization long ago shipped many of America's best manufacturing jobs overseas. With the U.S. relying on the rest of the world for such a large percentage of our goods, many investors are ready for the end of the "made in China" era. Well, it may be here. Read all about the biggest industry disruptors since the personal computer in 3 Stocks to Own for the New Industrial Revolution. Just click here to learn more.
The article Henry Ford's Big Breakthrough 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 and General Motors. 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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