In lieu of an abstract, here is a brief excerpt of the content:

✺ The auto industry’s second major Fordist production achievement early in the twentieth century was vertical integration, which means the control of all phases of a highly complex production process, from initial research to final sale. Vertical integration created an hourglass structure in the automotive industry: thousands of companies supplied parts and materials to a handful of manufacturers that assembled motor vehicles and then shipped them to thousands of dealers. Vehicles were assembled almost entirely from purchased parts during the first decade of the twentieth century, although pioneering producers had to fashion some parts themselves when they could not find any supplier .1 Many of the pioneer companies perished because they depended on assembling parts made by unreliable suppliers. The purchase of most parts from independent suppliers meant that early vehicle assemblers were “plagued by problems of irregularity of production, loss of materials in transit and through embezzlement, slowness of manufacture, lack of uniformity and uncertainty of the quality of the product.”2 A stoppage in a supplier’s plant could prove fatal to a car maker that had limited operating capital and no reserves. By 1910 the surviving vehicle producers had undertaken to make for themselves parts that others would gladly supply, but which seemed vital for the auto makers to control. The principal motivation for Ford and other car makers in installing moving assembly lines and other mass production innovations was to guarantee a supply of parts rather than to lower production costs.3 56 Eiji Toyoda told me himself . . . there was no mystery to the development of Toyota in Japan. He merely came to see the Ford Rouge Plant in 1950— and then went back to Japan and built the same thing. —Phillip Caldwell, Ford president (1978–80) and chairman (1980–85) 3 From Making Parts . . . From Making Parts . . . The ability to make one’s own parts was a source of strength and a measure of high quality and efficiency at GM and Ford, and to a lesser extent at Chrysler, through most of the twentieth century. Other producers, who made a smaller percentage of their own parts, were driven from the U.S. market because they had to buy from outside suppliers parts that were more expensive and of lower quality than those made by the Big Three. Smaller companies had to charge higher prices than the Big Three for vehicles of comparable quality or else charge comparable prices for vehicles of inferior quality. They could compete with the Big Three in quality or in price, but not in both at the same time. Only the Big Three could afford the expense of investing in their own parts-making operations. Increasing economies of scale drove out the smaller producers, leaving by 1960 one dominant company, General Motors; a distant second-place Ford; and a barely surviving Chrysler. All car makers practice some vertical integration, such as product development and engineering at the early stages of production, and final assembly and advertising at the other end. The major variation among car makers in degree of vertical integration is the extent of their control over production of the thousands of parts that go into their vehicles. No manufacturer ever produced 100 percent of its own parts, although GM and Ford came close at times. But as recently as the 1990s, General Motors made two-thirds of the parts attached to its motor vehicles, Ford about one-half, and Chrysler (then DaimlerChrysler) about one-third.4 They didn’t need to control 100 percent of parts production, just enough to dominate relationships with the companies that supplied the parts. After a century of expanding vertical integration, motor vehicle producers in recent years reversed the trend, moving toward vertical disintegration . Making most parts in-house was no longer considered a source of strength for the car makers. Instead, they outsourced production of many components to a variety of large independent suppliers. By selling off their parts-making operations, Ford and GM reduced their dependence on inhouse parts to DCX’s level. In past decades the vertically integrated Big Three car makers could dominate relationships with small independent parts makers. In recent years motor vehicle producers and suppliers have worked out new relationships based on more nearly equal partnership. Early on, Ford and General Motors emerged as the two dominant U.S. car makers through vertical integration, although the two companies achieved vertical integration in very different ways. Ford built the world’s 57 ✺ [3.133.144.197] Project MUSE (2024...

Share