The Importance of Adjusting Production to Sales in the Early Automobile Industry

Producing and selling mechanically complex and expensive consumer durables involves a number of difficulties, especially if the products are manufactured in high volume. This paper focuses on the problem that companies employing high volume production methods are extremely vulnerable to the consequences of the variance in final sales across the business cycle, unless they devise methods for adjusting production to sales. Evidence is presented that it was the Ford Motor Company that first developed the methods required to ensure that production was kept in line with sales. These methods played a heretofore overlooked role in the success of Ford during its early years. General Motors was able to overtake Ford for leadership of the automobile industry only after it began to adopt similar methods, beginning in 1924.