Vertical Integration Study: Ford Motor Company Marketing II Mr. Yates

Brief history of Ford Motor Company  The Ford Motor Company is an American multinational corporation based in Dearborn, Michigan, a suburb of Detroit.  The automaker was founded by Henry Ford and incorporated on June 16, In addition to the Ford, Lincoln, and Mercury brands.

Ford’s brands/relationships continued  Ford also owns a small stake in Mazda in Japan and Aston Martin in the UK.  Ford's former UK subsidiaries Jaguar and Land Rover were sold to Tata Motors of India in March  In 2010 Ford sold Volvo to Geely Automobile.  Ford will discontinue the Mercury brand at the end of 2010.

Backward or Forward Integration?  Fairly balanced actually…  Ford owns many of it’s means of production, and distribution / retail networks

Backward Integration of Ford  Ford tired of being held up by suppliers as he scaled up production of cars with his assembly line and began to vertically integrate over the course of the 20’s.  He moved his plant nearer to resources in preparation of this move (from Highland Park to Rouge River MI)

Backward Integration Specifics  His own railroad  Control of 16 coal mines (carbon from coal + iron makes steel)  700,000 acres of timberland  Built a sawmill  Acquired a fleet of Great Lakes freighters to bring ore from his Lake Superior mines  And a glassworks

A Day in 1927…(integration example)  At 8 o'clock, just enough ore for the day would arrive on a Ford freighter from Ford-owned mines and would be transferred to the blast furnaces and transformed into steel with heat supplied by coal from Ford mines in Kentucky.  It would continue on through the foundry molds and stamping mills and exactly 28 hours after arrival as ore would emerge as a finished automobile.

Integrated Systems  Similar systems handled lumber for floorboards, rubber for tires, and so on.  At the height of its success Ford’s holdings stretched from the iron mines of northern Michigan to the jungles of Brazil, and it operated in 33 countries around the globe.  Most remarkably, not one cent had been borrowed to pay for any of it. It was all built out of profits from the Model T.

Other integration efforts  Ford experimented with a commercial rubber plantation in the Amazon jungle  Ford also built aircraft and aircraft engines (during the world wars) which might have been used to ship materials

Interesting ventures…  Ford long had an interest in plastics developed from agricultural products, especially soybeans. He cultivated a relationship with George Washington Carver for this purpose.  Soybean-based plastics were already being used in Ford automobiles throughout the 1930s in plastic parts such as car horns, foam, in paint, etc.  This project culminated in 1942, when Ford patented an automobile made almost entirely of plastic, attached to a tubular welded frame. It weighed 30% less than a steel car and was said to be able to withstand blows ten times greater than could steel. Furthermore, it ran on grain alcohol (ethanol) instead of gasoline.

Joint Ventures  In 1912, Ford cooperated with Fiat to launch the first Italian automotive assembly plants  (After building successful plants in England and Canada).