Re-assessing History
At the basis of the MFR concept lies a re-analysis of the history of automotive mass production, which involves a re-assessment of the relative importance of the contributions of Ford and Budd. Ford, usually credited with the single-handed invention of the mass production of cars, innovated in the mass production of components, such as engines, gearboxes, axles. These were all key modules from which to build the Model T. The Ford Model T was a car of ‘Edwardian’ design and consisted of a combination of modules built into and onto a separate chassis frame. Ford did not make its own bodies for the Model T, these were all outsourced. Few modern mass produced cars are built this way.
Compared to Ford’s Model T, the distinguishing feature of modern mass produced cars is the fact that they are built around a structural metal box, the monocoque, or unibody, which combines the body and chassis of old. This is usually made up of pressed and welded components of sheet steel. This unit, which constitutes the body of a modern car, is then painted and finally enters the assembly process where key mechanical components are added. This all-steel body technology was developed by Edward Budd and the first patents applying to it date from around 1913, the year Ford introduced his moving assembly line.
Modern mass car production
A modern integrated mass production assembly plant consists of a press shop, where sheet steel is pressed into panels, a body shop (‘body in white’) where these panels are welded into a combined body-chassis unit – the monocoque or unibody – a paint plant, where this unit is painted and protected against corrosion, and a two-stage assembly process, where the painted body receives its mechanical, electric/electronic, glass, and interior trim components. In terms of investment costs, the elements needed to make the all-steel body – the Budd contribution – far outstrip the elements needed to make the Ford contribution, much of which nowadays would be outsourced to suppliers (see PowerPoint presentation).
These investments in all-steel body technology are very high and much of it needs to be sustained at high levels as the regular model changes practiced by the car industry bring with them high investments in new tooling on a regular basis. Such dedicated die-sets usually represent an investment of around £50-£100 million per model range. As long as markets demanded basic automobility and were prepared to accept limited variety, this mass production system worked well benefiting from true economies of scale. However, as market saturation set in, car buyers began to demand greater variety. As a result, per model volumes fell and economies of scale were lost in many cases. A tension between the demands of the market and the demands of the Budd-Ford mass production system developed, which is still growing today.
In Europe it is now estimated that as a result of these trends at least 70% of models offered in the market are unprofitable. These are cross-subsidised by the remaining models that are made in sufficient volume to retain some profitability. A car maker offering, say, eight different model ranges in the market may only make a profit on two or three of these. Even in a good year, the car industry has returns on sales of around 5%, a figure that would be unacceptable to other sectors, such as the supermarket sector (this is the reason why supermarkets still don’t sell cars). What is worse is that over time these profit levels are declining, leading to major crises such as those suffered by Ford and GM recently and by MG Rover. Also consider all the firms consolidated with competitors in recent years, leading to new brand constellations: DaimlerChrysler, Renault-Nissan-Samsung-Dacia, GM-Saab-Subaru-Isuzu, Ford-Volvo-Jaguar-Land Rover-Aston
