21:22 4 4 Search X |M_A1_Feb 2022 Assessment Brief and Guidance: Automotive Industry: the Age of mass production "1 Although steam-powered road vehicles were produced earlier, the origins of the automotive industry are meted in the development of the gasoline engine in the 18605 and '705, principally in France and Germany. By the beginning of the 20th century, German and French manufacturers had been joined by British, Italian, and American makers. 1.1 Developments before World War I Most early automobile companies were small shops, hundreds of which each produced a few handmade cars, and nearly all of which abandoned the business soon after going into it. The handful that survived into the era of large-scale production had certain characteristics in common. First. they fell into one of three well-defined categories: they were makers of bicycles, such as Opel in Germany and Morris in Great Britain; builders of horse-drawn vehicles, such as Durant and Studebaker in the United States; or, most frequently, machinery manufacturers. The kinds of machinery included stationary gas engines (Daimler of Germany, Lanchester of Britain, Olds of the United States), marine engines (Vauxhall of Britain), machine tools (Leland of the United States), sheep-shearing machinery (Wolseley of Britain), washing machines (Peerless of the United States), sewing machines [White of the United States), and woodworking and milling machinery (Panhard and Levassor of France). One American company, Pierce, made birdcages, and another, Buick, made plumbing xtures, including the rst enameled cast-iron bathtub. Two notable exceptions to the general pattern were Rolls-Royce in Britain and Ford in the United States, both of which were founded as cannakers by partners who combined engineering talent and business skill. In the United States almost all of the producers were assemblers who put together components and parts that were manufactured by separate rms. The assembly technique also lent itself to an advantageous method of nancing. It was possible to begin building motor vehicles with a minimal investment of capital by buying parts on credit and selling the nished cars for cash; the cash sale from manufacturer to dealer has been integral in the marketing of motor vehicles in the United States ever since. European automotive rms of this period tended to be more selfsnicient. The pioneer automobile manufacturer not only had to solve the technical and nancial problems of getting into production but also had to make a basic decision about what to produce. Alter the rst success of the gasoline engine, there was widespread experimentation with steam and electricity. For a brief period the electric automobile actually enjoyed the greatest acceptance because it was quiet and easy to operate, but the limitations imposed by battery capacity proved competitively fatal. Especially popular with women, electric cars remained in limited production well into the 19205. One of the longest-surviving makers, Detroit Electric Car Company, operated on a regular basis through 1929. Steam power, a more serious rival, was aided by the general adoption, alter 1900, of the socalled ash boiler, in which steam could be raised rapidly. The steam car was easy to operate because it did not require an elaborate transmission. On the other hand, high steam pressures were needed to make the engine light enough for use in a road vehicle; suitable engines required expensive construction and were difcult to maintain. By 1910 most manufacturers of steam vehicles had Iumed to gasoline power. The Stanley brothers in the United States, however, continued to manufacture steam automobiles until the early 1920s The internal combustion engine was developed already in 1859 by the Frenchman Lenoir, and was rst commercialized by the German Otto in 1878, These inventors regarded their engines as an alternative for the steam engine, just as the electric motors which were emerging at the time were supposed to be. As was already seen above, electric motors started to be used as a power source in factories as well as on railway locomotives from the early 20th century onwards, thus indeed rapidly replacing the steam engine. However, history had a completely differently role in mind for the internal combustion engine. It was the nancial director of Otto's rm, Daimler, who started the application of the internal combustion engine to bicycles, boats and carriages Daimler set up his own rm, together with Maybach, lhus starting what is now known as the Daimler-Benz corporation. Daimler's elforts led eventually to the concept of the automobiie, which was quickly adopted by other firms, initially mainly in Germany and France. In 1896, Henry Ford built his rst 'horseless carriage' in the United States. In 1903, he set up a rm called the Ford Motor Company, after he had earlier been engaged in the Henry Ford Company (which later became Cadillac}. The Ford Motor Company got caught up in a patent dispute, because Ford was accused by the Association of Licensed Automobile Manufacturers to violate a patent they controlled (patent on the gasoline-powered car). The law suite dragged on until 1911, when Ford, in appeal, won the case. in the mean time, the company had introduced the Model T in 1908, which, in its 18 years of existence would sell more than 15 million times. 1.2 Mass production: The Ford '5 Model T'" The outstanding contribution of the automotive industry to technological advance was the introduction of full-scale mass production, a process combining precision, standardization, interchangeability, synchronization, and continuity. Mass production was an American innovation. The United States, with its large population, high standard of living, and long distances, was the natural birthplace of the technique, which had been partly explored in the 19m century. Although Europe had shared in the experimentation, the American role was emphasized in the popular description of standardization and interchangeability as \"the American system of manufacture." The fundamental techniques were knoum, but they had not previously been applied to the manufacture of a mechanism as complex as a motor vehicle (see work, history of the organization of). 21:22 4 4 Search X |M_A1_Feb 2022 / Violate a patent they controlled(patent on the gasoline-powered car), The law suite dragged on until 1911, when Ford, in appeal, won the case. In the mean time, the company had introduced the Model T in 1908, which, in its 18 years of existence would sell more than 15 million times. 1.2 Mass production: The Ford '5 Model 1"\" The outstanding contribution of the automotive industry to technological advance was the introduction of full-scale mass production, a process combining precision, standardization, interchangeability, synchronization, and continuity, Mass production was an American innovation The United States, with its large population, high standard of living, arid long distances, was the natural birthplace of the technique, which had been partly explored in the 19th century. Although Europe had shared in the experimentation, the American role was emphasized in the popular description of standardization and interchangeability as \"the American system of manufacture.\" The fundamental techniques were known, but they had not previously been applied to the manufacture of a mechanism as complex as a motor vehicle (see work, history of the organization of). The kind of interchangeability achieved by the \"American system" was dramatically demonstrated in 1908 at the British Royal Automobiie Club in London: three Cadillac cars were disassembled, the parts were mixed together, 89 parts were removed at random and replaced 'orn dealer's stock, and the cars were reassembled and driven 800 km (500 miles) without trouble. Henry M. Leland, founder of the Cadillac Motor Car Company and the man responsible for this feat of Showmanship, later enlisted the aid of a noted electrical engineer, Charles F. Kettering, in developing the electric starter, a signicant innovation in promoting the acceptability of the gasoline-powered automobile. The massvproduced automobile is generally and correctly attributed to Henry Ford, but he was not alone in seeing the possibilities in a mass market. Ransom E. Olds made the rst major bid for the mass market with a famous curveddash Oldsmobile buggy in 1901. Although the rst Oldsmobile was a popular car, it was too lightly built to withstand rough usage. The same defect applied to Olds's imitators. Ford, more successful in realizing his dream of \"a car for the great multitude,\" designed his car rst and then considered the problem of producing it cheaply. The car was the socalled Model T, the besteknown motor vehicle in history, It was built to be durable for service on the rough American country roads of that period, economical to operate, and easy to maintain and repair. It was rst put on the market in 1908, and more than 15 million were built before it was discontinued in 1927, When the design of the Model T proved successful, Ford and his associates turned to the problem of producing the car in large volume and at a low unit cost. The solution was found in the moving assembly line, a method first tested in assembling magnetos. After more experimentation, in 1913 the Ford Motor Company displayed to the world the complete assembly-line mass production of motor vehicles. The technique consisted of two basic elements: a conveyor system and the limitation of each worker to a single repetitive task. Despite its deceptive simplicity, the technique required elaborate planning and synchronization. This was a process invention that was characteristic of the Taylorist way of producing. The assembly line broke down the task of assembling an automobile into small parts and gave workers a standard (and small) amount of time to carry out this task. The high productivity (and consequently, relatively low prices of the nal product) that was associated with this, led to rapid growth of the sales of the ModelT Ford, leaving other automobiles brands [including versions based on different engines, such as electric motors or steam engines} far behind. The rst Ford assembly line permitted only very minor variations in the basic model, a limitation that was compensated for by the low cost, The price of the Model T touring car dropped from $950 in 1909 to $360 in 1916 and still lower to an incredible $290 in 1926. By that time Ford was producing half of all the motor vehicles in the world. Ford's success inspired imitation and competition, but his primacy remained unchallenged until he lost it in the midel9203 by refusing to recognize that the Model T had become outmoded More luxurious and better-styled cars appeared at prices not much higher than that of the Model T, and these were increasingly available to lowincome purchasers through a growing usedcar market. In Britain, William R. Morris (later Lord Nufeld) undertook to emulate Ford as early as 1912, but he found British engineering rms reluctant to commit themselves to the target-scale manufacture of automotive parts. Morris in fact turned to the United States for his parts, but these early efforts were cut short by World War I. In the [9205 Morris resumed the production of low-priced cars, along with his British competitor Herbert Austin and Andre-Gustave Citroen and Louis Renault in France. British manufacturers had to face the problem of a tax on horsepower, calculated on a formula based on bore and the number of cylinders. The effect was to encourage the design of small engines that had cylinders with narrow bore and long stroke, in contrast to the wide-bore, short-stroke engines favoured elsewhere. This design handicapped the sale of British cars abroad and kept production 'orn growing. It was not until 1934 that Morris Motors nally felt justied in installing a moving assembly line; the Hillman Company had preceded Morris in this by a year or two. 1-. J. 21:22 4 4 Search X |M_A1_Feb 2022 1.3 Spread of mass production Ford's assembly line appeared to be useful in other industries as well, and in the age of mass production, the system became the norm in many factories producing in mass volumes. From the point of view of the worker, the system had important disadvantages, because it greatly decreased the quality of work. The boredom associated with the repetitive tasks and the mental stress resulting from the steadily moving hell were aptly characterized in Charlie Chaplin's movie 'Modem Times' (1936), in which an assembly line worker gets literally caught up in the machinery that controls his life. This type of degradation of the quality of work was naturally opposed by the labour unions, which had emerged since socialism slowly started to emancipate the labour class in the late 19m century. The organization of workers into labour unions (traditionally stronger in Europe than in the United States) led to a special mode of 'regulation' of labour relations, based on (oen centralized) negotiations between employers and unions. The unions sought to acquire a part of the increases in prots that was associated with the increased productivity, and this led to a strong increase in wage levels in the industrialized world. This, in turn, led to increased demand [workers spending their wages) for consumption goods, and increased the virtuai circle of scale economies and mass-production. The term 'Fordism' has been used for this mode of regulation in the labour relations and the general socio economic changes associated with it. The age of mass-production also provides a splendid example of the systems nature of technological change, by means of the pervasive nature of mineral oil, Obviously, the success of the automobile driven by an internal combustion engine crucially depended on gasoline, a product derived from mineral oil. In the United States, oil had been in demand as a lel from the mid 19m century onwards. but it was only in the 191th that the oil industry received an important stimulus with the application of the rst cracking process. The term cracking refers to a chemical reaction in which the heavy hydrocarbon molecules in petroleum are broken up into lighter ones by means of heating, by applying pressure and possibly catalysts. The end product consists of a mixture of light oils, heavy oils and a number of gasses. Cracking was introduced commercially by Standard Oil in [913. By that time, the large Standard Oil company had been divided up into smaller parts, of which the Indiana part received a plant that employed William Burton. Burton had been working on the cracking process in an R&D laboratory, and had built a pilot plant in 1910. Although the experiments had been highly successful, the Standard Oil company had refused to build a commercial plant applying the new technology, because of fears of explosions. The new management. however, decided to build the plant in 1913. and the process became highly successful, leading to further development of the technology involving also other oil companies. During the 19205, new types of cracking were discovered, including thermal cracking and catalytic cracking. These new processes were applied as ow processes, whereas the Burton process is a batch process. In a batch process, the costs of initiating and handling the reactions (cg, reaching the desired temperatures, etc.) are much higher than in a ow process, where a constant stream of unrened oil is transformed continuously. These new methods of cracking greatly increased the productivity of oil rening relative to the original Burton process, with savings in terms of raw material (petroleum), man hours, capital investment and energy (all per gallon of gasoline produced). The pervasive nature of mineral oil becomes clear when we realize that besides providing a major new source of fuel, the cracking processes also proved to be an important stimulus for the development of synthetic materials. Before cracking, known 'plastic' materials were confined to a small number of variations. The first plastic material was developed in Britain by A. Parkes and called Parkesine. However, apart from winning a bronze medal at the International Exhibition in 1862 in London, the product never caught on. Celluloid, invented in 1869 by J.W. Hyatt in the United States, did become a commercial success. but was to a large extent superseded by Bakelite. This substance was invented in the United States in 1909 by the Belgian L,H. Baekeland. The large scale rise of plastics became possible aer it was realized that the (by-)products of the cracking processes developed in the 1920s could be used to produce certain polymers (macromolecules made up of chains of simpler molecules). Polymers on their turn are the basic input for most piastic materials used nowadays. Thus, oil became a main source for both energy and material input in the age of mass production. In accordance with what we saw in the case of, e.g.. electricity and steam, however, the inventive source for the widespread use of oil in this way lays relatively long back in history, i.e., the 19105 and 19205. The widespread diffusion of the technological paradigm based on oil took place only in the period after the second world war. The same holds for the process innovation part of mass production, i.e., the assembly line and its further development. Let us now turn again to the organizational changes associated with the technological changes that have been diseussed so far. The increased scale of production led to further growth of the size of companies. The large conglomerate rms emerging under managerial capitalism in the previous period, now generally extended their activities beyond the borders of the countries in which they were founded. This led to the (further) rise of the multinational rm, which has offices and branches in many different countries. The rise of the multinational company was greatly facilitated with the rise of interaction between countries due to air travel (see the example of the Comet in chapter 1, Verspagen, 2000) and telecommunications (telephone as well as mass-communication media such the television and radio). International trade (imports and exports) and Foreign Direct Investment {FDI} are the two main modes through which the multinational corporation works. Trade flows often take the form of intrarrn flows (exports from one part of the rm to a part located in a different country), when the foreign afliate of the rm is primarily aimed at selling and marketing products in a local market. FDI takes place when the rm physically locates its production in a different country, for example because it wants to make 21:22 4 all 4'? if} 4 Search X |M_A1_Feb 2022 The large scale rise of plastics became possible aer it was realized that the (by-)products of the cracking processes developed in the 19203 could be used to produce certain polymers (macromolecules made up of chains of simpler molecules) Polymers on their turn are the basic input for most plastic materials used nowadays. Thus, oil became a main source for both energy and material input in the age of mass production. In accordance with what we saw in the case of. e.g.. elecuicity and steam, however, the inventive source for the widespread use of oil in this way lays relatively long back in history, i.e., the 19105 and 19205. The widespread diffusion of the technological paradigm based on oil took place only in the period after the second world war. The same holds for the process innovation part of mass production, i.e., the assembly line and its further development. Let us now turn again to the organizational changes associated with the technological changes that have been discussed so far. The increased scale of production led to further growth of the size of companies. The large conglomerate rms emerging under managerial capitalism in the previous period, now generally extended their activities beyond the borders of the countries in which they were founded. This led to the (further) rise of the multinational rm, which has offices and branches in many different countries. The rise of the multinational company was greatly facilitated with the rise of interaction between countries due to air travel (see the example of the Comet in chapter 1. Verspagen. 2000) and telecommunications (telephone as well as mass-communication media such the television and radio). International trade (imports and exports) and Foreign Direct Investment (FBI) are the two main modes through which the multinational corporation works. Trade flows often take the form of intrarm ows (exports from one part of the rm to a part located in a different country), when the foreign afliate of the rm is primarily aimed at selling and marketing products in a local market. FDI takes place when the rm physically locates its production in a different country, for example because it wants to make use of low wages. or because it wants production to be carried close to the nal market (so that the production process keeps close contacts with the local market and the product can be tailored to local preferences]. 1.4 Large-scale organization Although the appearance of mass production in the automotive industry coincided with the emergence of largescale business organization, the two had originated independently. They were related, however, and inuenced each other as the industry expanded. Only a large rm could make the heavy investment in plant and toolng that the assembly line required, and Ford was already the largest single American producer when it introduced the technique. The mass producer in turn enjoyed a cost advantage that tended to make it increasingly difcult for smaller competitors to survive. There have been exceptions, but the trend has been consistent. General Motors General Motors Corporation (GM), which ultimately became the world's largest automotive rm and the largest privately owned manufacturing enterprise in the world, was founded in 1908 by William C. Durant, a carriage manufacturer of Flint, Michigan. In 1904 he assumed control of the ailing Buick Motor Company and made it one of the pncipal American producers. Durant developed the idea for a combination that would produce a variety of models and control its own parts producers. As initially formed, General Motors included four major vehicle manufacturersiBuick, Cadillac, Oldsmobile, and Oaklandand an assortment of smaller rms. The combine ran into nancial trouble in 1910 and was reorganized by a nancial syndicate. A similar combination. the United States Motor Corporation, was formed in 1910, collapsed in 1912, and was reorganized as the Maxwell Motor Company, General Motors survived. A new reorganization took place aer Durant, with backing by El. du Pont de Nemours and Company. regained control in 1916. Durant, who had previously established the Chevrolet Motor Company, brought Chevrolet into GM in 1918. Rise of the Big Three At the end of World War 1, Ford was the colossus, dominating the automotive scene with the Model T not only in the United States but also through branch plants throughout the world. British Ford was the largest single producer in the United Kingdom. GM was emerging as a potential major competitor in the United States. No other automotive rms of comparable size existed. During the next decade there was a striking transformation. The depression of 1921 had far-reaching effects on the American automotive industry. GM was plunged into another nancial crisis. Alfred P. Sloan became president of the corporation in 1923 and raised it to its unchallenged rst place in the industry. Among other steps. he gave GM a staff-and-line organization with autonomous manufacturing divisions, which facilitated management of a large corporate structure and became the model for other major automotive combinations. Henry Ford also went through a crisis because the 1921 crash caught him involved in the construction of a large new plant (River Rouge) and in the process of buying out his stockholders. Ford weathered the stoirn (though many of his dealers. unable to set] cars and not permitted to return them, went out of business], but the Ford Motor Company had reached its crest. The third member of the \"Big Three\" automotive manufacturers in the United States was created at this same time. When the Maxwell Motor Company failed in the 1921 depression, Walter F. Chrysler, formerly of General Motors, was called in to reorganize it. It became the Chrysler Corporation in 1925 and grew to major proportions with the acquisition of the Dodge Brothers company in 1928. When Ford went out of production in 1927 to switch from the Model T to the Model A (a process that took 18 months}, Chrysler was able to break into the low-priced-car market with the Plymouth. The independents By 1929 the Big Three supplied threeifourths of the American market for motor vehicles; most of the remainder was divided among the ve largest independentsHudson. Nash, Packard. Studebaker. and Mr cloud anaethan We ' ' ' d] 21123 4 4 Search X |M_A1_Feb 2022 Sloan became president of the corporation in 1923 and raised it to its unchallenged rst place in the industry. Among other steps, he gave GM a sta-and-line organization with autonomous manufacturing divisions, which facilitated management of a large corporate structure and became the model for other major automotive combinations. Henry Ford also went through a crisis because the 1921 crash caught him involved in the construction of a large new plant (River Rouge) and in the process of buying out his stockholders Ford weathered the slorrn (though many of his dealers, unable to soil cars and not permitted to return them. went out of business], but the Ford Motor Company had reached its crest. The third member of the \"Big Three" automotive manufacturers in the United States was created at this same time. When the Maxwell Motor Company failed in the 1921 depression, Walter F. Chrysler, formerly of General Motors. was called in to reorganize it. It became the Chrysler Corporation in 1925 and grew to major proportions with the acquisition of the Dodge Brothers company in 1928. When Ford went out of production in 1927 to switch from the Model T to the Model A (a process that took 18 months}, Chrysler was able to break into the low-priced-car market with the Plymouth. The independents By 1929 the Big Three supplied threefourths of the American market for motor vehicles; most of the remainder was divided among the ve largest independenlsiHudson, Nash, Packard, Studebaker, and Willys-Overland. In less than 10 years the number of automobile manufacturers in the United States dropped from 108 to 44. Some of the minor carmakers had technological or personal interests. including Nordyke and Marmon, makers of Mai-mun luxury cars, and EL, Cord, who marketed 'ontA wheel-drive cars between 1929 and 1937. The depression years of the 19305 eliminated all but the largest independmt manufacturers and increased still funher the domination of the Big Three. Motor vehicle production declined from a peak of more than ve million in 1929 to a low of just over one million in i932. It rose again slowly but had not returned to the 1929 gure when World War I] broke out. While these years were difficult economically, they saw some significant developments within the industry. Greater emphasis was placed on style in passengerear design, with the general trend in the direction of incorporating the body, bumpers, and mudguards into a single pattern of smoothly owing lines. A number of technical features came into general use: the V-3 engine, introduced by Ford in 1932; three-point engine suspension; freewheeling (permitting the car to coast freely when the accelerator was released); overdrive (a fourth forward speed); and, on a limited scale, automatic transmission. ---End' of the scenado---- Notes: 1. Sources ofthe case: ' Binder, AK. Automotive Industry. Retrieved from: www.b1'itanica.eom ' Verspagen, B (2000), The Economics of Technotogicai' Change: A text book for engineering and economics students. Eindhoven: Eindhoven University of Technology. (Chapter 1) 2. Student should do search and study for the Model '1'. some sources are as: - Ford Corporation: htrpscorporate.ford.eomfarticlest'historyt'the-model-t.html ' Britanica: https:fl'wwwbritannicacontftechnolognyodelT 'Wikipedia:https:l'ien.wikipedia.orgfwikit'Ford Model T Questions: Freeman makes a distinction between ve technologicai revolutions in the history of modern capitalism. These are outlined in Table 1, along with some characterizing features for each of them. The history starts with the Industrial Revolution. which can be dated around 1730 (all the dates are necessarily crude). Since then. ve major technological revolutions pass. of which the last one - the Age of Mass Production - associated with the Automotive Industry (described in the table 1). Each of these revolutions is characterized by a small number of carrying basic innovations, together constituting a technological paradigm. Two particularly important lectures of these technological paradigms are given by the transport system. and the energy system to some extent. Table 1, Technological Revolutions Timing Revolution Transport systems Energy systems [780-] 840 Industrial Revolution: mechanization of Canals. carriages Water power textiles 1840-1890 Age ofsteam power and railways Railways Steam power 1890-1940 Age ofelectricity and steel Railways Electricity 1940-1990 Age of mass production Motor vehicles, Airlines Fossil fuels Source: Verspagen [2000. p.62)