| Show Cutting Wag Wages s Does Not Cut Ford Costs Costs Ford Only Way to Get Low Cost Product Is to Pay High Price For High-Grade High Human Service Manufacturer Manufacturer Manufacturer Says and Cites ites Examples By y HENRY FORD FORDIn FORDIn In Collaboration with Samuel Crowther I Copyright 1926 by by- Doubleday Page Co All AU Rights Reserved LAST BAST year ear the Ford Industries p hl directly in ill wages rages about I two hundred an and fifty million dollars purchases were bly responsible for the payment of about five hundred million dollars s more mort in wages ages service stations and dealers paid ab about ut t o two hundred and amI fifty million dollars in n wages So th the company last year ear generated about one thousand mil mil- dollars in with the first car It took us approximately twenty years to build a million that cars cars that mu- mu mil millionth lI nth was turned out on Decem Decem- December December ber 10 1315 1915 On May 28 1921 we turned out our five millionth car carOn On Oil June Juno 4 1924 we turned out our ten millionth car Since Sinco then our ta factories have reached a capacity In excess of two million cars ears a year In 1922 we wo bought three times as much as wo we made ourselves Now It Is only twice as much We Vc have raised the tho minimum wage from five dollars a day to six dol- dol dollars dol dollars lars mrs a day But our cars are aro sold soldat soldat soldat at 40 per cent less than they were lii 1914 when our average wage was a II day These cars have havo Bt steadily decreased In price while almost all aU other othet othe commodities have haye Increased In In price The touring car may be bo bought at about h enty cents a pound pound pound-n a highly refined piece of machinery built blit with the greatest care and of ot the best mate mate- materials materials rials costs less JellS per pound than beefsteak PROFITS GO BACK D The Tho profits of the Ford Indus Indus- Industries industries Industries tries other other- than a comparatively ly negligible amount have gone back into Inte the Industries The public built our I through buying our product The public subscribed not through stock or bonds but by purchasIng the commodities which we manufacture ure and offer for sale We have havo sold to the public at a price higher hl he- he than the cost of or although although often We e have e ef f to a 0 point hr 1 no lId profit was visible and thus ourselves to to find ways arid arI mean means DS o 0 reducing costs lu In ord r to 10 eoma eal a profit Every Every year yar h has s been a profit ari all of that each ach profit year ear has gone gono hick back into the business to provide facIlities for for- still further os costs costi and raising wages These put but ut back Into the busl bust have rot riot ro been I Invested ested In Wedo buildings I j IJ J aid I machinery e edo do not regard the tho publics public's ret returned to tur tho tb business 01 as on an in investment vestment en cn Interest bo be charged That Thill money is time the publics public's money and the public having confidence enough In ou our product to ply y th the ilie money moncy to us u I is entitled to benefit y y Its lis confidence I dence We e gould could have hove no no right to charge the public t on Its own money mony Th There re are however profits and profIts Profits may be stupidly fixed and stupidly used It If so they de destroy troy their source and van van- vanIsh vanish vanish ish A business which charges too high a 0 profit disappears about ns as quickly as one that operates at ot a I aI loss SELLING SELLIN AT LOSS However useful the commodity Continued ll on Page Pace Eight Cutting Wages Does Not Cut Ford Costs Costs Ford Continued d irom rom rona Page One one n may make It if it It is produced and Cold at a loss loos los Its lis production ceases There Thero Is nothing In quality of goods or quality of o sen Ice that can overcome the th economic error of selling at a 0 loss Ion Profit Is 10 essential to business t vitality In proportion as a business Increases the th cost coot of production decreases A A slack lack t shop Is I costlier coomer to maintain than a 0 bu busy shop chop The Th duty of t every manager ot of Industry Is to encourage busi busl- busi- busi business business ness neos by making It easy for tor people to obtain what they need nerd at a 1 aprice price pric they can afford A new re- re re revival vival Ival of confidence and energy In Inthe inthe Inthe the nation should be met halfway by a decrease In prices prien a that Is in line with the th decrease In cost To hold up tip prices is to tax the people more mor heavily than even evena evena a government could Good man man- management man management pays dh dividends In good wages lower prices and more business it ft Is very bad manage manage- mont that can sea In a revival re of national ambition only an nit to III lay heavier burdens on the thc spirit of ot enterprise This ought to bo be self evident e No 20 Noone Noon one who gets rich quickly stays staS rich Going Into business just to get Iet rich Is 10 a 0 waste wast of or effort W Wo do have a type of ot business whose hose only objective Is the Is-the the swelling of ot some some- someone's someone's someone's ones one's personal fortune fortun A which exists to make mak one man or orone orone oron one family rich and whoso whose ex- ex exIstence existence ex existence Is ot of no moment when this Is achieved Is not solidly rounded founded Indeed cupidity wilt will usually forc force such decreases In the quality of goods such euch curtailment of service such arbitrary charges chares to the public that the tho th business w will ill 11 fade tade long Ion before Its lis has hils contributed to anybody's fortune a The motive mothe to profit prom has various phases One organization must have havo profit to pay the demand of those persons who ho hare havo hav Invested In Inthe Inthe the business but who have no hand handIn handIn In Its lis operation They Thy are arc absentee takers takers dividend What goes to them does not strengthen the busi- busi business busi busl business ness but Is taken out of the busi busl- busi- busi business business ness nen and may no go to swell welt the sum of Idleness outside There Is much Idleness of ot course over our countr country we w see millions of children In school their leisure and education are made possible by the tho th fact tact that men are areat areat areat at work Likewise with the aged and Infirm nd-Infirm Infirm But Dut there ther is unjustifiable flable Idl ness and tb that t too Is pp ported by men at work F BUSINESS S MUST PAY Y PAYA A A business should pay everybody It and for every ment us use in r t It should shoud pay fr managerial lal brans braIns productive n ability contrIbutive labor but labor but it should also pay the public ho whose e patronage supports It A that does dou not make a 8 profit for tor the buyer of n a r m as w w ll 11 a as asfor asfor for the selle Is I not a good bust busi business ness nen If It a II nan Is not better oft off for tor buying than Lan h hl would be b If Ir he had kept ept hl mon money In his pocket there I Is something wrong Buyer and seller must both be In some war W as of ot a trans trans- transaction transaction action ele the else ell th balance Is broken Pile up th thi 1 e breaks long h an you OU Upset the th world We have yet to learn the tho antl social anti elal nature n or o every tho that Is lanot not Just and profitable all around The business Itself the organ organ- organIzed entity that engages In pro pro- pro production or service needs a profit or a surplus to keep Its vitality a little In advance of the drain upon It ft This surplus is to prevent depletion und under r extraordinary strain also to permit of expansion Growth Is necessary to life lire and gron groath th requires n a surplus This statement is made of ot the th business not not of o the tho owner or di- di director di rector of the th business He lie I Is paid lIe any other worker out of or the costs of the he business The profit belongs to the to business to safe safeguard guard the business In Its task or of giving and to permit natural growth The main Is the th thi this entity that gives employment to producers and gives useful commodities or needed service to- to the to-the the public The The- principle of service re re re- re requires requires quires that profits bo be b measured only b by y legitimate replacement t and expansion expansion necessary expansion Those are the limits flexible limits flexible limit limits limits Sometimes ono one on hears a complaInt against expansion as though It were potentially danger donger dangerous ous eus If It expansion Is undertaken In the Interest of ot service quite quit the opposite Is the tho th case cue AS has hils been shown In a previous pre chapter Ono One need tear fear only the th business which Is not growing for tor it is not render render- renderIng rendering Ing service Our rather extensive o program which ha has to do both with pro pro- production production pro production and distribution has hu been carried through because the th pub pub- public pub public lic lie ha has found our products useful and no step 1 as 8 been taken ex- ex excepting ex excepting In the th Interests of the pUblic and the wage war earners We have havo built nothing for tor the th sake of building We W 0 have bought nothing for tho sake sak of ot bu bus Inc Ing We Ve W make nothing for tor the th sake sak of ot making Our operations all center about the manufacture of oC motors It If those thos who wh sell to us ua will wll not manufacture at the prices which upon Investigation we e believe to tobe tob ho be right then we w make the article ourselves ourselves In many cases we have gone lone to the primary sources and In other ether cases we wo manufacture ture ture just jut enough ot or a product to get familiar with It so that In an emergency we may make It Sometimes al- al also al also so 80 w e O do th this his Is merely to test the price we w are ar paying In distri distri- distribution distribution the same sam rule rul holds We e have lake lak ships ocean going colne ships and railroad In order that we mo may measure transportation charges All this I Is In the th bene bone benefIt benefit fit of the he public for excepting the tho railroad which Is a separate corporation each ach new branch or of Industry merges Into the th Industry and the th savings which ensue are for the eventual benefit of the public For Instance we w have hav made rubber tires although we have no present Intention of or going Into the tire tir business The Th price or of rubber mo may Le be L forced Inordinately high In any event we e have ha to tobe tobe tob be r prepared It would never do doto doto to have hav to shut down our production production tion for tor lade lacle of tire tires We e buy on cost and not on market price and w we bellev bellevo wrender we render a service s r In so doln doing dolne it If we felt otherwise wo should not toll follow on the he practice In our own pro production we we w set ourselves tasks task sometimes we arbitrarily fix prices and then Invariably we are able to make mako them whereas Ir ht htwe iw we merely accepted things as they are we w should never ne get any any- anywhere anywhere where We W e follow rollow exactly the same practice with those from whom wo we tuy and tuy-and and Invariably they prosper SPECIFIC SE C Take a case cue Before this policy was fully tully developed a manufacturer was making a certain certain tam tain automobile body for us at a certain price each lie Jle II was ras not manufacturing In a large wn way and his 1110 profits proWs were wert insignificant We e calculated that those bodies ought to b be made at exactly half the price and that thal hat Is the th price we asked him to get pet down to This was the first time that real pressure pressur for a- a lower price pric had ever er been put upon him and or of course he h thought ho he h could not do any better than he h- h had been do- do doIn doing Inc do-Inc In ing Ills His profits showed him that he could not It Is ono one on of the od- od oddities od oddities dittes of ot business s that a man will cite what he has done In the past pastas pastas pastas as a proof of what he h can doin do In Inthe the future Is only some some- something something something thing to learn from This man consented to try Iry to manufacture at exactly one half hi his former price Then for the th first time In his life he began to learn how to do bust busi business ne ness lie He H ha had to ralS rate rals wages for ho had to Save have first class men Under the th presure of ot necessity he found ho he could rould make cost re- re reductions reductions re reductions here there and every every- everywhere everywhere where and the th upshot of It was waa that he be made mOlo money out or of the low price than he had ever made mado out of of tho the th high price and his workmen have hav received u a higher wage One frequently hears that wages Java have tobe to be cut because com of-com ot com petition but bit competition Is nev nor never er really met by lowering wages Cutting wages wees doea doe doc not nt reduce costs It It Increases them The Tho Th only way to get ret a cost w product is isto 1 I to pay a high i for tor a high h grade grado of human service and see to It through management that you get that s service Wo We W have hav had many experiences such as that with Ith the bod body v maker and nd we w e be be- be here lIeve that our policy ol ey Is In the tho line of public service Some Som of cur ur extensions extensions have ha hav been emergency measures For Joor Instance the th making of t glass 1 Thu Automobile changed very quickly from an open nimer vehicle to a closed year year-r year round und means of ot trana tr ans but few tew know nov what hat astrAin 11 u train strAin this put upon the tho th glass glass- making glass milking making facilities ct ef the tho th country We e us about quarter one of or of nil all the tho plat plato plate glus lass produced In the United States State But Dut glass gl las was getting scarce and so wo we w went rent nt out and bought the tho plant and equipment of or the tho Allegheny Glass Gla company at mere near Pittsburg which had hada hada a 0 reputation tor for turning out first first- first class class plate At the th time tim of our purchase three thre years ago It waS making six million square squar feet reet of glass a 0 year and 30 SO per cent or of orIts Its output nes ts as not fit for tor motorcar motor motorcar motorcar car use Now with only a small amount of or additional machinery and using most of tile tir lie old machin machin- machinery machinery ery cry and the th old staff of men we weare weare wear are setting getting i round eight million feet teet a year y ar end less than 10 per percent percent percent cent Is unfit until for tor our use us The principal change we w made mad was put In the tho th six dollar a day dllY minimum wage In order to make mak the plant complete se ve had also to buy a silica quarry at Cabot eight teen mil miles awal awa away There with forty men w we e quarry crush and ship from from eight to of o sand Hand a 0 day We W 0 use us the th same samu men who worked off ort and on In the quarry before but they are aro ar dif dif- different dif different ferent terent men under the tho th six alx dollar a day wage v age f and steady work They are ar nearly all laborers laborer for tor wo have hav arrange arranged that nearly no skill need be used In any Job they are not shift shift- shiftless shiftless less Jess They stay on oh on the th job the they work they Invest t and a num number ber bor of ot them have hav moved out of the tho old shacks they thy used to live hive In and are aro ar building real reat homes And the th man effectiveness under the new methods Is |
