What Bill Ford Is Learning from Great-Grandpa

Now that Ford Motor Company has announced its “Way Forward” restructuring plan, does the auto maker have a real future? Without doubt. Can its current chairman and CEO, William Clay Ford, Jr., finally stop its growing losses in money, market share and respect?

Probably, but it won’t be easy. Many business analysts remain skeptical about the prospect of any significant turnaround even by 2012. But they ignore the background, experience and historically grounded perspective of this great-grandson of legendary founder Henry Ford.

When Bill Ford’s new print and TV commercials proclaim that “Innovation Is Our Mission,” he rightly points to the company’s long record of innovation in manufacturing and management. Bill not only acknowledges Henry’s achievements but is also taking steps that Henry would surely have favored. Bill, like Henry, has long recognized that working conditions affect profits. Henry pioneered the large, highly centralized manufacturing plant, epitomized by his famous River Rouge Plant outside of Detroit.

At its height in the 30 years after the 1930s, the River Rouge daily employed over 100,000 workers who manufactured cars from raw materials into finished products. The plant attracted countless visitors, among them Charlie Chaplin, who visited it before he produced “Modern Times,” the classic movie depiction of workers as cogs in machines.

Giving Bill a template for reform, Henry ultimately favored decentralized manufacturing, combining small-scale modern technology with such rural “traditional” customs as part-time farming and community leisure activities. Henry’s most significant response was the nineteen “village industries” he established in Michigan between the 1910s and 1940s, all within a sixty-mile radius of Ford world headquarters in Dearborn. Set in declining existing communities, these small plants made parts for Ford cars and trucks, parts often made nowhere else in the Ford empire. Utilizing high-tech advances that at once allow for variations of plant size and layout and mechanize the toughest and most dangerous factory jobs, Bill’s global company has embraced decentralization in many of its 100 plants on six continents.

Like other innovations, decentralization depends heavily on workers’ attitudes. Bill has gone way beyond his great-grandfather in trying to maintain positive relations with organized labor. But pending layoffs and early retirements, reduction of health care benefits and North American plant closings will surely make Bill’s task harder than ever. Henry’s legendary hostility toward labor’s efforts to organize his company made the village industries an easy – if misguided – target as being simply anti-union. By contrast, Bill has recognized labor’s critical part in preserving the longtime company motto that “Quality is Job One.”

Along with decentralization, Bill has expanded the company’s outsourcing that began with the village industries. As a 1938 Life magazine article about the River Rouge Plant revealed, “Ford still buys parts and materials from 6,000 independent plants throughout the nation.” Bill has vastly increased that number.

But outsourcing requires reliable inventory controls, and Bill has greatly improved Ford Motor Company’s inventory policies without falling into the trap created by his ousted predecessor, Jacques Nasser, for whom impersonal computerized systems were panaceas. Bill has built on Henry’s legacy, as detailed in Ford and Samuel Crowther’s “Today and Tomorrow” (1926).

As the publisher of a 1988 reprint argued, Henry, not the Japanese, initiated the “kanban” or “just-in-time” (JIT) inventory system: keeping only enough parts on hand to fulfill orders, thereby saving considerable money, space and labor. Even JIT’s official creator, Taiichi Ohno, acknowledged that he had “learned it all from Henry Ford’s book.” As Bill appreciates, JIT greatly helped Toyota’s growing supremacy.

Most American corporations claim to be environmentally concerned, but often that is mere lip service. By contrast, Bill is a genuine environmentalist — and despite legitimate criticisms from the Sierra Club charging that he is increasingly ambivalent when profits are at stake — he remains the foremost environmentalist among auto industry leaders.

In earlier company ads Bill praised Henry for developing “ways to recycle lumber, use alcohol as fuel, slash manufacturing waste, and use soybean-plastic parts.” Besides his current advocacy of hybrids and “ethanol-ready” vehicles, Bill has transformed much of the old River Rouge Plant into a model environmentally progressive site that once again attracts visitors.

Bill’s initial use of Henry’s pictures and words in ads was certainly a risk. When Henry died in 1947, his once heroic reputation had sunk so low — not least, for poor labor relations — that he was barely mentioned in company promotions for the next 50 years. Yet Bill has inherited from Henry a broader perspective all too rare in corporate circles, where conventional numbers crunchers frequently prevail.

One need not overlook Henry’s darker side to acknowledge the accuracy of the legacy represented by Bill Ford’s “Innovation is Our Mission.” That legacy will be critical to the “Way Forward” restructuring plan.

Howard P. Segal is Bird and Bird Professor of History at the University of Maine. He is the author of “Utopias: A Brief History from Ancient Writings to Cyberspace Communities” (2012).