The automobile industry_A

Prof. Moreno Muffatto

2021-2022
The automobile industry

"the industry of industries"

Peter Drucker
The origins

l Artisanal product at the beginning

l Modular design

l Chassis and body (wood) made by different producers

 Ford Motor Company
(Founded 1903, Detroit)
Model N (1906)

Entry level
7000 cars were made
Production ended in 1908.
Ford - Model T

l Interchangeability of parts

l Model T (1908) the “car for the

masses”

l Why black? Painting and drying

l A dozen mechanics, lot of

experimentations
Ford production system

l Assembly labor time: from 12h 28’ to 5h 50’ (- >50%)

then 2h 40’

l Production throughput time from 21 to 14 days

l Increasing productivity > Steady declining costs

l Work day from 10 to 8 hours > shifts

Ford (cont.)

l Learning Curve
l The learning curve shows that manufacturing costs fall as volume
rises.

l Experience curve
l The experience curve traces declines in the total costs of a
product line over extended periods of time as volume grows.
Price of Model T and cumulative production
Ford (cont.)

l Increasing level of vertical integration (including

glass production)

l Market share (1921) 55,7%; GM 12,3%

Frederick Taylor

“The Father of Scientific Management”

The Principles of Scientific Management
by Frederick Taylor

l Published in 1911

l Prior to scientific management work was performed by

skilled craftsmen who had learned their jobs in lengthy
apprenticeships.

l Scientific management took away much of this

autonomy and converted skilled crafts into a series of
simplified jobs that could be performed by unskilled
workers who easily could be trained for the task.
Frederick Taylor’s shop system

l Frederick Taylor’s shop system employed these

steps:
l Each worker’s skill, strength, and learning ability
were determined.
l Stopwatch studies were conducted to precisely set
standard output per worker on each task.
l Material specifications, work methods, and routing
sequences were used to organize the shop.
l Supervisors were carefully selected and trained.
l Incentive pay systems were initiated.
Scientific Management at Ford

l In the 1920s, Ford Motor Company’s operation

embodied the key elements of scientific management:
l interchangeable parts

l standardized product designs

l mechanized assembly lines

l specialization of labor

l low manufacturing costs

l mass production
Scientific Management

1. Develop the one best way to do each job.

2. Select the best individual for the position.

3. Ensure that work be carried out in prescribed fashion

through training and by increasing wages for those
workers who follow current procedures.

4. Divide work efforts among employees so that activities

such as planning, organizing, and controlling are the
prime responsibilities of managers rather than
individual workers.
 Ford Model T - 100 Years Later

http://www.youtube.com/watch?v=S4KrIMZpwCY&feature=player_embedded#!
General Motors
General Motors

l Founded by William Durant (1908) as an holding

(Buick, Oldsmobile, Cadillac, brought into the group)

l Vertical integration
why? Product integrity
why not? Financial problems

l Financial aid from Du Pont

l Alfred P. Sloan appointed as CEO (1920)

General Motors

l Economies of scale across segments

l Sharing design and components across brands

l 1924 > market segmentation:

“a car for every purse and purpose”

l Chevrolet at low end; Cadillac at high end

GM Model Year
Production technology

l Body: From wood to metal stamping technology

l Owen dryed

l Throughput time reduced from weeks to one day

Phases in the auto indutry evolution

l Class market (before 1908)

Mass Market

Mass – Class (with variety)

Summary

l The origins

l Ford Motor Company

l The Ford production system

l Frederick Taylor and the Scientific Management

l General Motors