Mises Daily Articles
The End of Ford: It Began in the New Deal
[This article is excerpted from a chapter in The Wild Wheel, originally published in 1953.]
The Great Depression had revolutionary political and social consequences, some of them irreversible, some of them still acting with unspent force. It began in 1930 and continued like a nightmare of Prometheus in chains until the nation's energies were released again in preparation for World War II.
During these ten years the relations between government and people were fundamentally altered. The welfare of people became a direct responsibility of government, whereas always before government was a responsibility of people, and the people minded their own welfare. American ways of thinking and feeling were deeply changed, to the point at which people were willing to surrender personal freedoms and abide compulsions in exchange for a sense of social security.
The song of the wild wheel died suddenly. Even the echoes of it became hateful. In place of it was heard a mighty chorus, led by the voice of the New Deal, demanding that the wheels be tamed, that their revolutions be governed and planned to produce only as much as people could afford to buy at fair prices.
The delusion was that the wild wheel had caused the depression. It had produced too much, more than people could consume, thereby bringing to pass unemployment and the absurdity of want in the midst of plenty. No man was more unbelieving than Henry Ford. The popular delusion seized a great majority of the men of business, who were willing to strike hands with government to limit production, restore prices and put competition in a straitjacket; it could not seize him. His mind rejected it completely. But what he would not or could not see was that a world was passing. The delusion was but the furor attending its eclipse; and its eclipse was bound to include him because he was its symbol.
He was still under seventy, and apparently at the peak of his unpredictable powers; nevertheless, his horizons had reversed their direction. Instead of going away they were slowly moving toward him. And as a fateful coincidence, crises in the world of the wild wheel, utterly beyond his control, were parallel in time to crises in the affairs of the Ford Motor Company.
The V-8 was his own last mechanical triumph. As it developed year by year thereafter, to meet competition in style and refinement, fewer ideas came from him and more from the organization, subject to his approval. The authority of his yes and no was final and imperious to the end, but only when it was exercised, and many things went around him. More and more he relied upon Charles E. Sorensen, the Magnificent Dane who began as a pattern maker in the Ford shop at three dollars a day and became the great production genius of his time.
It was Sorensen who walked with the rope that pulled the first motorcar assembly line at Highland Park. It was Sorensen who went to California to see how they made airplanes there, because the Ford Motor Company was going to make them, too, for World War II, and said: "I don't understand this bird's next method."
They asked him what he meant by that. He said: "First you build the plane and then you drag everything into it through little holes."
They asked him how he would do it. He took the print of a plane and bisected it with lines. "I'd build it in sections, like that," he said, "then stuff the sections and bring them together."
That changed the method of airplane construction. It was Sorensen who said: "You never can forge enough cylinders for the airplanes you want."
They asked him how he would make them. He said: "I'd cast them."
They said: "That proves what we already knew. Automobile people can't make airplanes. You can cast the cylinders of a motorcar engine but an airplane engine is different."
What they were talking about was the lining of an airplane engine cylinder, fitted in the piston well like a membrane that grew there — an exquisite, jewel-like thing to look at, absolutely perfect and very slightly tapered because it will expand more at the spark plug end than at the other, which causes it to be precisely true when the engine gets hot. Sorensen went back to the River Rouge plant and cast some sample cylinders. They were tested under hydraulic pressure that would rise until they were crushed. The forged pieces buckled first and crumpled up; the cast cylinder, when it did buckle, went down like an accordion hat. After that, airplane cylinders were cast, else, as Sorensen said, there could hardly have been enough of them, because the forging process is very slow.
And it was Sorensen who built the famous Willow Run plant, to produce a bomber an hour, which was the largest single thing the Ford Motor Company ever did.
The V-8 was brought out in the third year of the Great Depression. That was bad enough. The obstetrical event was long and painful and entailed a kind of engineering crisis. This in turn led to a crisis between the Ford Motor Company and its unhappy dealers, who again for a long time had nothing to sell and began to give up.
Ford's complacency at this time astonished his associates. If he thought the superiority of the new car would sweep the market back to him he was disappointed. Although the V-8 was successful as a car, the most it could do was to hold the Ford Motor Company in third place, whereas it had been first. Now it had become one of the Big Three. The other two were General Motors, in first place, and Chrysler in second, who by this time knew as much about automobile making as Ford knew, even more. They were beating him in style and meeting him in price.
Each of his competitors had a line of cars, suited in price to the size of your pocketbook — that is, a low-priced car for the many, a more expensive middle-class car, and then one for the rich. Before the V-8 there had never been anything but a Ford car. When it was the Model T it was the Model T and nothing else. When it was the Model A it was the Model A, take it or leave it. A Ford was a Ford was a Ford.
"No factory," Ford had said, "is large enough to make two kinds of product."
But now he was persuaded that the Ford Motor Company too must have a line of cars. Besides the V-8 there was a six-cylinder car at a lower price, because the dealers wanted it — and the voice of the dealers was beginning for the first time to be respected, for the Ford agency was no longer the little gold mine it had once been. And then there was the Lincoln, which became a Ford product when Ford bought the Lincoln Motor Company. "More for personal reasons," he said, "than because we wanted it. We have no desire to make a commodity of the Lincoln."
Nobody could have made a commodity of the Lincoln. It was in its day the finest and costliest American automobile. Only the rich could afford it. It was designed by Henry M. Leland, whose fame in the motor world was such that when he organized the Lincoln Motor Company its capital stock was subscribed in two hours. At that time Model T was already high on its way. Leland built his ideal car and it was all that he meant it to be, but its cost was so high that its market was bound to be small and it was never a success in a financial way. Ford bought it to save it from bankruptcy. One of his personal reasons may have been the desire to have an automobile of that superb quality within his domain.
The understanding was that the Lincoln Motor Company should continue as a separate province, with Leland as its vassal lord. Ford did not intend to cheapen the car, and he never did; he intended only to reform the manufacturing methods in order to reduce the cost of producing it. But when his engineers, led by Sorensen, entered the Lincoln premises and saw how men worked who had been taught never to worry about cost, they were horrified; on the other side, when these engineers began to apply Ford methods to eliminate waste, Leland's blood curdled and he retired with an embittered heart.
The Lincoln became then a Ford problem. Simply, it did not lend itself to mass production, which meant that the price could not be reduced, and if the price could not be reduced the sales could not be increased.
One attempt at solution was to bring out a lower-priced car called the Lincoln-Zephyr. Then the hyphen was dropped and there was the Zephyr. Later the Zephyr disappeared and there was a new Lincoln, still a fine car but not like the old Lincoln and not so costly.
Before the Great Depression the Ford Motor Company's amazing growth, always with its own capital, enabled it to absorb mistakes with astonishing ease. It could write off its white elephants and forget them. So it wrote off a railroad, an excursion into aviation, and the Fordson tractor, to mention only three.
When it became just another motorcar company, one of the Big Three and in third place, something of that reckless spirit went out of it. However, its essential character never changed. General Motors was a confederacy, Chrysler was a democracy, and both were large borrowers of capital; but the Ford Motor Company was a monarchy so long as Ford lived and a tight family possession after he died, with his grandson, Henry Ford II, on the throne.
It was in the middle of the Great Depression that the transfer of economic power from the employer to organized labor took place. It took place legally, but in a curious way. The New Deal passed a law under which organized labor was free to enjoy and exercise the power of monopoly — provided it had the strength to seize it in open combat with the employer, the government to act as umpire. What followed was a series of bitter struggles on the ground of industry-wide collective bargaining. Organized labor won.
In the motorcar industry, as aforesaid, Ford was the most implacable of the Big Three and for that reason the last to be attacked. He was then seventy-five. His defeat was without solace. The union won more than it asked for, and after that the Ford Motor Company was a closed shop; only union members could work there, and Ford became the collector of the members' compulsory union dues, acting for the union treasury.
What he had lost was not just a battle with labor. He had lost his world. Never again would the wheels be wild in a Ford shop. The union would attend to that. The significance of this change was deeper than anybody knew at the time. Although Ford never expressed it in rational terms he must have known it intuitively.
The one great justification of mass production as he had developed it, for all that might be valid in the resentments of labor, was that it did progressively cheapen the cost of satisfying human wants, so that goods, automobiles or anything else, were ever more abundant and more available, possibly to the point at which sometime they might become as cheap as water carried from the well. But in order for mass production to have that result it was necessary that management should be able to control costs, and management cannot control costs unless it controls both wages and the tempo of work and obeys the hard law of the machine. Here lies the enigma. You may do with it what you like.
In Ford's philosophy, the benefits of mass production were intended for the consumer, which includes labor, since all wage earners are also consumers. In his scheme the consumer was more important than the producer; and if this seems a bit dialectical you may consider the fact that while you may dispense with the wage earner by putting a machine in his place, the consumer, who buys the products of the machine and makes mass production possible, is indispensable. The wage earner is more important in the aspect of consumer than in the aspect of producer, and it follows that in order to be a good consumer he must have high wages.
But when labor itself has the power to say what the wage shall be and how much it will give for the wage received, it claims for itself the first benefits of mass production; the consumer is forgotten. Thus the true economic ends of mass production are defeated, and all you have left is a method of producing goods. You may say it another way: that the intentions of mass production cannot be realized unless management and labor are both free. So long as that freedom existed in the motorcar industry, the cost of an automobile went lower and lower until it became, pound for pound, the cheapest manufactured thing in the world, not the Ford car only but all cars; and automobile labor at the same time was the highest-paid labor of its kind in the world.
It was estimated that one year the Model T generated, directly and indirectly, a payroll of one billion dollars, and that year the car sold for twenty cents a pound. And so we became an automobile people. That could not happen again in a world of tame wheels. If the political and social conditions that now exist had existed in 1900, the American motorcar industry as we know it could not have been created at all.