From Independence to Integration: The Corporate Evolution of The Ford Motor Company of Canada

Dimitry Anastakis

From Independence to Integration: The Corporate Evolution of the Ford Motor Company of Canada

1904 - 2004

[pic 1]

Anastakis outlines: Ford Canada’s progress from a relatively independent entity with strong ownership and its own overseas subsidiaries to a fully integrated part of Ford’s North American operations

The Era of the Automotive Pioneers: Ford of Canada’s Birth

• FMCC was formed in 1904 by Gordon McGregor in Walkerville, Ontario, after he met Henry Ford and agreed on a deal that provided FMCC access to Ford’s technology and product lines
• Start-up: 48 investors took the chance and on August 17, 1904, FMCC was incorporated for $125,000
• Success of FMCC by the 1920s: employed 4,000 workers and produced more than 50,000 automobiles annually

“Not a Branch Plant”: Ford and the Political Economy of the Canadian Auto Industry

• Reasons for FMCC’s success by 1930s:

• Henry Ford’s success among failures ensured FMCC’s survival
• High tariffs kept foreign-made cars out of the Canadian market
• Connections to the British imperial trade system
• Perfect location to take advantage of the nearby Ford-USA operation in Detroit
• Right timing in terms of McGregor securing his agreement with Ford before Ford’s operations really took off in the 1910s

The “Problem” of Ford’s Canadian Ownership

1. Henry Ford did not pay much attention to the Canadian firm

• His lack of interest endangered the family’s control over the firm

1. “Voting trust”
2. Original terms and agreements between Ford Canada & Ford stated:

• Ford company’s rights to nominate the Canadian board
• Clause was obsolete; nominees were members associated with Ford

1. Decline of Ford’s financials[pic 2]

• GM had more sales than Ford for the first time
• Stock market crash

• Ford unable to adapt to the changing industry

• GM offered variety of cars and styles versus Ford’s “Tin Lizzie”

The Era of Organizing Men: Ford Gains Majority of Ownership and Organizational Control of Ford-Canada

• After Edsel Ford’s death in 1943, Ford-USA bought all his voting shares – gaining  52% of FMCC’s voting shares by 1948
• FMCC lost all of its advantages and was forced to obey to orders from Detroit. Changes include:

• New arrangement of changes in general commercial assistance, the supply of material and the furnishing technical
• Fees paid for Ford’s engineering and technical expertise
• Decisions regarding finances, production, expenditures, labor relations, management appointments, pricing and credit policies as well as annual budgets were to be reported

The Era of Continental Integration: Ford-Canada and the Auto-Pact Regime

• Three sides to the Auto Pact:

1. U.S.A: Desired a continental free trade agreement for the autos

2. Canada: Worried that such a plan would wipe out Canadian auto production

3. Auto companies: Wanted to take advantage of North American economies of scale

• Ford-USA heavily supported the 1965 Auto Pact, which allowed Ford to rationalize its North American operations. The Auto Pact:

• Lead to reorganization of Ford
• Created significant changes for Ford-Canada’s operations
• The deal was highly successful for Ford as the late 1960s and early 1970s were the most productive in their history

Ford of Canada in the North American Auto Industry

• FMCC prospered in the 1980s and 1990s before the company was privatized in 2004
• With privatization, FMCC: removed costs, eliminated redundancies and discontinued the publishing of annual reports

• Conditions of the North American industry:

• oil embargo and energy crisis
• flood of Japanese imports
• restructuring of the industry in the last 1970s and early 1980s
• arrival of foreign transplants in USA and Canada
• Canada-USA Free Trade NAFTA agreement

• Changes in the industry:

• NAFTA was created in 1993
• Ford reorganized its North American concerns into the North American Automotive Operations (NAAO)

Why is Ford Canada’s history important?

• Portrays the ever-changing and constant flux nature of multinational enterprises
• Illustrates the competitive challenges and shifting corporate, political and economic landscape faced by companies
• Allows for an assessment of Ford’s long-term business strategy to bring Ford-Canada tightly under its control
• Emphasizes the changing international automotive environment through the Auto Pact and other trade pacts such as NAFTA