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A Study of Ford Motor Company

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Ford Motor Company

Ford Motor Company was officially incorporated on June 16, 1903 but there is a great deal that happened in the years prior to that date that affected its founder. Henry Ford was born on July 30, 1863 in Dearborn, Michigan to an Irish immigrant father and orphaned mother. The Fords were farmers in Michigan. Henry did not enjoy farm work as he grew up, so in 1879, he walked the eight miles to Detroit and took a job with the Michigan Car Company. As a child, Henry had always enjoyed taking apart machines and putting them back together. This was a rare talent and many consider Henry Ford to be a natural born mechanic.

In Detroit, Henry’s apprenticeship with the Michigan Car Company lasted only a week because he embarrassed his foreman when he solved a mechanical problem that older mechanics couldn’t figure out and was fired (Bak, 9). Henry took a series of other jobs in Detroit and later Dearborn before he married Clara Jane Bryant in 1887. In 1891 Henry took a job for Edison Illuminating Company in Detroit. Two years later he was promoted to chief engineer.

The late 1800s was the time of the first automobiles. Henry Ford kept an eye on how the small American automobile industry was doing while he was working for Edison. During the time he was chief engineer, he took advantage his responsibility of being on call twenty-four hours a day by working late nights in his backyard workshop. His goal was to make a gasoline engine out of scrap. On Christmas Eve in 1893, Henry hooked up his first gasoline fueled internal combustion engine to the kitchen sink in his house and had Clara pour gasoline into the intake valve while he turned the crankshaft. Several years later, Henry’s first vehicle was ready to be tested.

Early in the morning of June 4, 1896, Henry Ford and one of his backers, Jim Bishop, rolled the “quadricycle” out of the backyard shed after first knocking down part of the wall because they failed to measure how wide the vehicle was in comparison to the width of the door. Mr. Bishop rode ahead on his bicycle to warn any horse drawn travelers of the strange machine that was being tested. The quadricycle worked. It was capable of traveling at speeds of more than twenty miles per hour. He made a few small adjustments after that night and within a week or so was traveling out in the countryside with his family and other guests.

Later that year, Henry Ford was invited to the annual Association of Edison Illuminating Companies convention in New York City for his abilities as an engineer and innovator. At the convention, Ford met Thomas Edison himself. Edison praised Ford’s gas engine idea in person and encouraged him to “Keep right at it” (Bak, 27). When Henry Ford returned to Michigan, he immediately sold his quadricycle for two hundred dollars and began developing a better model.

The Detroit Automobile Company was organized on August 5, 1899. Henry Ford, with the help of Detroit Mayor William Maybury, raised $15,000 from several wealthy citizens to launch the venture. Henry agreed to share ownership of his pending patents with his partners in order to keep the immediate funds coming in so he could continue to experiment with his new automobile (Bak, 29). He was designated chief engineer and had no authority with how the company was to be managed. Fifteen months later, the company had lost $86,000 and had virtually nothing to show for it. According to Ford, his backers were “more interested in turning a quick buck than in building a better car” (Bak, 30).

After the dissolution of the Detroit Automobile Company, Ford recognized the potential advantages of automobile racing. Automobile racing was quickly becoming a popular American sport in 1900. The best drivers were looked at similarly to baseball players and prize fighters. Henry didn’t care much himself for racing but he understood it was a good way to get his automobile noticed and pick up investors.

On October 10, 1901, Henry Ford upset Alexander Winton in an exhibition ten mile dirt track race. At that point, Winton was the premier automobile racing company in the country. A month later, the Henry Ford Company was incorporated. The victory over Winton led to five investors putting up over $30,000 in cash. Henry was a one-sixth owner and his title was chief engineer. As it was in the Detroit Automobile Company, Henry Ford was not in control of the management of the company.

Four months later, Ford resigned from the company that held his name. He vowed to “never again put myself under orders” (Bak, 45). Henry wasn’t following the wishes of his backers. He wanted to make a faster racer but the management wanted him to focus on passenger cars. The conflict of interests forced him to resign. Ford left with a $900 settlement, his drawings and the agreement to change the company’s name. They chose Cadillac, the name of the founder of Detroit.

Ford spent most of 1901 and 1902 looking for investors to keep his automobile experiments alive. He was able to attract enough of them to incorporate Ford Motor Company on June 16, 1903. The company was capitalized at $100,000. John S. Gray invested $10,500 in cash which gave him ten and a half percent of the company and the title of president (Bak, 50). Unlike in his previous two companies, Henry Ford was named vice president and general manager. Gray died in 1906 and Henry Ford became president and the majority stockholder of his company. Ford found some success in the first several years of the Ford Motor Company. The company that was capitalized at $100,000 in 1903 had a net worth of over a million by 1907, but it wasn’t until the announcement of the production of the Model T in October of 1908 that made Ford big (Burlingame, 53) Twelve years later nearly one of every two cars in America was a Ford Model T (Watts, 111).

Henry Ford faced several major dilemmas on his way to co- founding the Ford Motor Company. One of the first big ones was finding investors. Ford first persuaded backers through his success at the Edison Illuminating Company. After a couple manufacturing failures however, finding wealthy men in Detroit that would fund him was a good bit more difficult. He began to use racing his cars to build up his reputation. When he beat Winton in a ten mile dirt track race, fans everywhere viewed him as a hero. This made Ford much more attractive to investors.

During the Detroit Automobile Company and the Henry Ford Company, Ford got burned both times by not being in control of how the company was operated. At that time he was not really wealth or control motivated. He was more worried about building a better car. When he started the Ford Motor Company however, he was much more control motivated because he felt that the reason his first two companies didn’t work out was because the management was too motivated by financial gains. His second company which turned into Cadillac did not fail but it was nowhere near as successful as the Ford Motor Company. His conflict of founder motivations with those managers led to him leaving and eventually creating a more successful company.

Even after Ford Motor Company was created he had to make a choice about what sort of car he was going to ultimately produce. Was it going to be a big and powerful racer or an inexpensive but well-built simple family car? Later in the life of the company he had to decide how he was going to make a more simple and inexpensive vehicle. Later yet, he had to decide how he was going to hire, keep, and pay his employees.

I think that Henry Ford’s first two car manufacturing failures made him into a control motivated founder for when he started the Ford Motor Company. Earlier in his career, he was an engineer that was pretty good at finding funding but he didn’t really have any management skills and he didn’t think he had any management skills. In the Detroit Automobile Company he was happy as the chief engineer because that’s what he was. He was not a manager, he just wanted to build a better car. The Ford Motor Company later became so successful because his basic want didn’t change. He wanted to build a better car and he did. People bought his car because it better met their needs. It was fairly inexpensive, simple, durable, and cheap to repair. Fords could be used by urban families and farmers alike. While other car companies were catering to the rich with powerful luxurious cars, Henry Ford was catering to the masses.

Henry Ford may have been able to get investors that better shared his view for his company in the beginning. That is probably unlikely though. He didn’t know any better at that point and the automobile industry at that time was not geared to making cars available to the masses, he may not have been able to attract any investors if he adamant about his vision with them. He learned his lesson and it all worked out. We are still driving Fords today. The F-Series pickups have been the best selling vehicles in America for the past thirty years.

It is extremely difficult to put myself into Henry Ford’s position. I don’t have his skill set and the world is a slightly different place one hundred years later. If I had to answer the question, “What would you have done differently?” I would probably have to say that I wouldn’t have changed anything much. I would probably be a bit more wealth motivated in a growth company like Ford, but again if I was president of a huge company that was continuing to produce year after year I might have more similar motivations to Henry Ford. The most important thing though was Henry Ford’s belief in building a better car. Without that, Ford Motor Company would not have been nearly as influential as it has been.

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