Vertical Integration Study: Ford Motor Company

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

2. 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, 1903. In addition to the Ford, Lincoln, and Mercury brands.

3. 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 2008. • In 2010 Ford sold Volvo to Geely Automobile. • Ford will discontinue the Mercury brand at the end of 2010.

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

5. 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)

6. 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

7. 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.

8. 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.

9. 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

10. 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.

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