Henry Ford and Alfred P. Sloan: Industrialization and Competition

Written by: David Pietrusza, Independent Historian

The gasoline-powered, internal-combustion automobile revolutionized human life: It brought people together. It made trade and commerce far easier. It connected cities to growing suburbs. It helped rural Americans travel to towns. It gave young people more independence. It helped stimulate the development of the factory assembly line. It revolutionized the American economy and society.

And Henry Ford revolutionized the automobile. Companies had made cars before Henry Ford; 502 auto companies were founded between 1900 and 1908. But early automobiles were expensive, difficult to drive, and hard to maintain, and the roads on which they were driven were primitive. Owning a car was barely better than owning a horse. Michigan’s Ford, a born tinkerer, had a better idea. Actually, he had a vision. “I will build a motor car for the great multitude,” he proclaimed. “It will be large enough for the family but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men to be hired, after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary will be unable to own one and enjoy with his family the blessing of hours of pleasure in God’s great open spaces.”

That is easy to say. But how would Ford – often derided as “Crazy Henry” Ford – accomplish his goal after failing at several early attempts at car making?

Henry Ford, pictured here in 1919, revolutionized the automobile industry by making cars available to more middle-class American consumers than ever before.

He did it by embracing mass production and standardizing the parts in each car. Those ideas were not exactly new even then. Eli Whitney, the inventor of the cotton gin, had introduced standardized parts in firearms manufacturing back in the early 1800s. But Henry Ford built massive factories with assembly lines to manufacture cars for the entire American population. He also standardized the tasks needed to assemble cars. “The man who places a part does not fasten it,” he explained “The man who puts in a bolt does not put on the nut; the man who puts on the nut does not tighten it.”

Ford’s ideas succeeded beyond his wildest dreams. The Ford Motor Company’s manufacturing methods allowed it to cut the price of automobiles dramatically, and because more Americans could now afford a car, sales skyrocketed and Ford soon dominated the industry.

When Ford Motor started operations, it required 13 man-hours to assembly a vehicle. Henry Ford drove that down to a mere 93 minutes. As a competitor noted:

From 1909-10 to 1916-17 the price of Ford’s Model T was lowered year by year as follows: $950, $780, $690, $600, $490, $440, $360. The magical result of that was a volume that justified the cost of the factory changes that preceded each cut in price. In those same years his production schedule grew as follows: 18,664; 34,528; 168,220; 248,307; 308,213; 533,921; 785,432.

Ford introduced his most successful car, the famous “Model T,” in September 1908. By the time the last Model T rolled off the assembly line in May 1927, a phenomenal 15 million of them had been sold. In 1918, a farmer’s wife near Rome, Georgia, wrote to Ford: “You know, Henry, your car lifted us out of the mud, it brought joy into our lives. We loved every rattle in its bones. . . .”.

The Model T, pictured here in 1921 with Henry Ford, was the most successful of Ford Motor Company’s models.

Efficiency had its cost in human terms, however. Ford’s repetitive assembly-line system ground his workers down, and high turnover became a problem. To solve it, in 1914, Ford doubled his workers’ pay rate to an unheard-of $5 per day, causing workers to flock to his factories. The high wages also startled the world and at the same time made it possible for Ford’s employees to purchase their own Model Ts.

But the same free market that contributed to Ford’s success allowed other industrialists to challenge his prominence. Ford had dominated his competitors, but he never eliminated them. His most important competitor was the highly innovative General Motors.

From the beginning, General Motors (GM) was very different from Ford’s operation. GM’s co-founder William Durant had already achieved great success early in life by manufacturing horse-drawn vehicles. And whereas Ford Motor Company long remained focused on a single product line, GM introduced a wide array of subsidiary companies and models: Oldsmobiles, Cadillacs, Buicks, Plymouths, and, most prominently, Chevrolets, GM’s most affordable model. Nonetheless, in 1921, GM controlled less than 13 percent of the U.S. auto market.

The 1921 Chevrolet 490, named for its price of $490, was able to compete with the Ford Model T by being $5 cheaper and coming with an electric horn, a speedometer, and headlight dimmers.

Durant was twice forced out of his company. Eventually, control passed to Alfred P. Sloan Jr., who had gained success and wealth by supplying roller bearings to the auto industry. Sloan was ready to make changes to car manufacturing and sales that Ford would not. Ford forced other shareholders out of his company and decided he knew what was best for consumers, famously saying that “Any customer can have a car painted any color that he wants so long as it is black.” (He had discovered that black paint dried the most quickly on his assembly lines.) To Henry Ford, time was money, and money saved could be passed on to consumers in the form of lower prices.

But not everyone wanted a car that was black. Not everyone wanted a Ford or a Model T. Not everyone wanted to take orders from one man at the top of the corporate pyramid. Alfred P. Sloan let each division of General Motors operate in its own way. He was not only an innovator in corporate organization, he also mastered the new consumer culture of the 1920s. If consumers started out owning a Chevrolet but wanted a better car when their incomes rose, he would be happy to sell them a Buick or an Oldsmobile. If they were doing really well, he would be more than glad to sell them an expensive Cadillac. And if consumers did not have the cash to buy a GM product, the company would sell them one on credit.

Sloan also pioneered what became known as “planned obsolescence” by creating a different model of each GM brand each year. There might be technological improvements or maybe just a styling upgrade. But the changes in each new “model year” were designed to create interest in GM and sell more GM vehicles to consumers who were merely tired of their old cars. Said Sloan, GM existed “not . . . to make motor cars” but “to make money”.

Alfred P. Sloan, pictured here on the cover of Time magazine in 1926, made consumers feel they had choices by changing GM’s models each year and offering multiple colors.

As Sloan explained,

[T]he corporation should produce a line of cars in each price area, from the lowest price up to one for a strictly high-grade quantity production car. . . . [T]he price steps should not be such as to leave wide gaps in the line, and yet should be great enough to keep their number within reason, so that the greatest advantage of quantity production could be secured; and . . . There should be no duplication by the corporation in the priceline of steps.

In the 1920s, GM charged forward while Ford stood still. Henry Ford refused to innovate or respond to consumer demand, and by the mid-1920s, many people were buying GM cars instead of Fords. Ford’s company was falling behind the times – and fast. Not a particularly young man when he entered the auto business, Ford was now in his sixties, but he reacted boldly. He closed his plants for most of 1927 – not one car rolled off his once-dominant assembly lines – while he figured out what to do next. The result was the new-fangled Model A, and the public loved it. Ten million people – 8.5 percent of the U.S. population – saw the car within the first 36 hours of its release. At New York’s Madison Square Garden, 1,250,000 people trooped in to see it in just five days.

The Model A went 65 miles per hour, came in four colors, and boasted 17 body styles. And, like GM’s product line, it could be bought on credit. Within six months, Ford had sold an astounding two million Model As. He had emulated GM’s methods and was competitive once again.

Eventually, both Ford and Sloan had reacted to the demands of the marketplace. Consumers now enjoyed a wider variety of cars offered by large manufacturers. In the 1920s, automobiles became one of the staples of the American economy and consumer culture. Over the next few decades, they also facilitated the rise of suburbs, increased geographical mobility, and stimulated the travel and tourism industry around the country.

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Review Questions

1. During the first quarter of the twentieth century, the internal combustion engine enabled people to accomplish all the following except

1. expand domestic trade and commerce
2. construct an interstate highway system
3. create a closer connection between rural areas and urban centers
4. stimulate change in methods of manufacturing production

2. The adoption of assembly-line manufacture by Henry Ford was similar to which technological development in U.S. history?

1. Will Durant’s method of building car engines
2. Alfred P. Sloan’s factory plans
3. Eli Whitney’s use of interchangeable parts
4. Robert Livingston’s invention of the steam engine

3. Henry Ford’s success in the marketplace was aided by his ability to

1. outsell his competitors, giving him a monopoly
2. increase the quality of the product while lowering the price
3. use less expensive materials to increase profits
4. keep the salaries of his employees low to make profits high

4. In 1914, Henry Ford paid his workers $5 a day because he wanted to

1. comply with federal minimum-wage laws
2. attract and keep a good workforce
3. lower workers’ standard of living
4. avoid paying workers a pension

5. Henry Ford temporarily closed his factories in 1927 because

1. the Great Depression created a massive downturn in the economy
2. the Ford “Model T” became mechanically obsolete
3. Ford Motor Company was hit with a major strike
4. he needed to resolve how to deal with competition from General Motors

6. Alfred Sloan’s General Motors manufactured several lines of automobiles because it

1. did not know which would be most profitable in the long run
2. was compelled by contractual obligations
3. had to comply with federal fuel-efficiency standards
4. wished to give consumers at different socioeconomic levels a choice of models

Free Response Questions

1. Explain why and how Alfred P. Sloan’s General Motors cut into Henry Ford’s market share in the mid-1920s.
2. Explain how Henry Ford came to dominate the U.S. auto industry after 1908.

AP Practice Questions

An automobile factory during the early part of the twentieth century is shown.

Refer to the image provided.

1. Which of the following best describes events depicted in this photograph?

1. Skilled labor was increasingly valued in factories.
2. Unsanitary working conditions led to the rise of labor unions.
3. Poor working conditions led to the publication of exposés like The Jungle.
4. The assembly line increased production and profitability.

2. Manufacturing strategies such as those used in the photo were first successfully implemented in the automobile industry by

1. Alfred P. Sloan
2. William Durant
3. Henry Ford
4. Eli Whitney

3. A historian might use this image to support which historical claim?

1. New manufacturing techniques led to increased production of consumer goods.
2. The U.S. population centers were shifting toward rural areas.
3. Episodes of credit and market instability led to the Great Depression.
4. Migration to large cities led to the industrial revolution.

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Primary Sources

“Ford Hails New Car as Greeting to Prosperity Reviews World Business in Showing Model.” Chicago Tribune. November 25, 1927, p. 170. https://chicagotribune.newspapers.com/image/354918730

Ford, Henry and Samuel Crowther. My Life and Work. Garden City, NY: Garden City Publishing Company, Inc., 1922. https://archive.org/details/mylifeandwork00crowgoog

“Henry Ford Explains Why He Gives Away $10,000,000: Declares that He Is Dividing Profits with His Employees, Not Paying Them Higher Wages, and that Workers as Partners Will Give Increased Efficiency.” New York Times. January 11, 1914, Sunday Magazine, pp. 1, 3.

Suggested Resources

Brinkley, Douglas. Wheels for the World: Henry Ford, His Company, and A Century of Progress. New York: Penguin, 2003.

Farber, David. Sloan Rules: Alfred P. Sloan and the Triumph of General Motors. Chicago: The University of Chicago Press, 2002.

Lacey, Robert. Ford: The Men and the Machine. Boston: Little, Brown and Company, 1986.

Lewis, David L. The Public Image of Henry Ford: An American Folk Hero and His Company. Detroit, MI: Wayne State University Press, p. 1976.

Livesay, Harold C. American Made: Men Who Shaped the American Economy. Boston: Little, Brown, 1979.

McCraw, Thomas K. American Business, 1920-2000: How It Worked. Wheeling, IL: Harlan Davidson, 2000.

Pelfrey, William. Billy, Alfred, and General Motors: The Story of Two Unique Men, a Legendary Company, and a Remarkable Time in American History. New York: American Management Association, 2006.

Sloan, Alfred P. Jr. and Boyden Sparkes. Adventures of a White Collar Man. New York: Doubleday, Doran & Company, 1941.