Family businesses: Ford: The end of a dynasty

When William Clay Ford Jr stepped down as chairman of the company founded by his great-grandfather this week, it brought nearly 100 years of family leadership to an end. Stephen Foley reports

History is "more or less bunk. The only history that is worth a tinker's damn is the history we make today." It is the most famous quotation by Henry Ford - creator of the Ford Motor Company, inventor of the modern assembly line, visionary of the consumer society. But it is also one that the extraordinary corporate dynasty he founded has often ignored.

A reverential approach to the memory of Henry Ford, and the myths and quotes associated with the founder, and an insistence on family control, have left Ford stuck in the past, overtaken by niftier rivals and burdened with huge debts. Some gloomsters are even whispering what previously was unthinkable. The company which began the love affair with the car, and was one of the few big names to have survived the Depression, may be headed for bankruptcy unless it can dramatically shift gears.

Finally, Ford's great-grandson, William Clay Ford Jr, has admitted that the best way to protect the family's $8bn heritage is to step aside from it. "I have a lot of myself invested in this company, but not my ego," he said recently. Indeed, friends have confided that he appears tortured by the fear that he will be the scion to destroy the family firm. He said: "The Ford family wants the company to succeed. Period."

Bill Ford's decision this week to stand down from day-to-day running brings down the curtain on four generations of family leadership that stretch back to the day in 1903 when Henry Ford incorporated Ford Motor Company with $28,000 raised from 11 investors. If history had shifted slightly sideways, we might all be wearing a Ford rather than driving one. Henry Ford actually first demonstrated his considerable engineering prowess by tinkering with watches, becoming in his teenage years a deft repairer of broken timepieces for neighbours and relatives.

The son of Irish immigrants, he grew up on a farm in Dearborn, Michigan, where the motor company is still based today. It was only because an employee on the farm mounted a threshing machine engine on wheels, that Ford transferred his obsession for taking things apart to the development of "horseless carriages". He built his first motorised vehicle, a "quadricycle", in 1896 and began to dream of an America where everyone travelled by motor vehicle.

During the following 40 years, he helped make that vision of a consumer society a reality, and in the process became one of the richest, famous, and most famously eccentric, people in the world. His twin innovations - in 1913 and 1914 - were the moving assembly line and the minimum wage for employees. Assembly line production cut the time it took to produce a Model T from 13 hours to three and allowed him to reduce the cost. Then, by doubling his employees wages to $5 an hour, he gave them the wealth to buy the cars they were making. Economists called it Fordism.

Aldous Huxley's Brave New World satirises this era of mass production and mass consumption. Imagining Ford as a messianic figure, the book is set in the 26th century, in a year designated 634 AF - After Ford. Even Ford was able to joke about the mass production he had ushered in, saying that his customers could have cars in "any colour, as long as it is black".

Ford's eccentricities are as legendary as his business achievements and he cuts a controversial historical figure, a reputation marred by accusations of anti-Semitism and pro-Nazi sympathies.

He bankrolled a newspaper, the Dearborn Independent, that printed virulently anti-Semitic views and published the discredited Protocols of the Learned Elders of Zion, a forgery that suggested the sort of Jewish conspiracies that Ford saw everywhere in banking and business. "The only statement I care to make about the Protocols is that they fit in with what is going on," he said later.

Historians - like the juries of defamation and libel trials for the Dearborn Independent - are split on the extent to which Ford influenced the paper's contents. But the notorious anti-Semite Gerald Smith, who met Ford in the 1930s, came away saying "I am less anti-Semitic than Ford". Smith, a white supremacist and Holocaust denier, also remarked that in 1940 Ford showed "no regret" for the Independent's anti-Semitic views, and "hoped to publish The International Jew again some time". In the same year Ford told the Manchester Guardian that "international Jewish bankers" were responsible for the Second World War. He was namechecked in Mein Kampf,in which Hitler praised Ford for what he said was his lone independence from international Jewry. In 1938, he was given the highest medal Nazi Germany could bestow on a foreigner.

Ford had been derided in the US for travelling to Europe in 1915, with other campaigners against the First World War, to meet with pacifists in Sweden and Europe. His pacifism did not stop Ford Motor Company from assisting with two world war efforts - converting factories to the production of military aircraft during the Second World War for example.

However, the charitable foundation set up by Henry and his son Edsel in 1936, is one of the biggest in the US - eclipsed only by the Bill and Melinda Gates foundation - and sets its primary mission as promoting democratic values.

Of all the Fords, Henry remains the most colourful and charismatic, and the most clearly suited to running the car company. It might be unreasonable to expect the rare talent of running a multi-national goliath to pop up repeatedly in the same gene pool, but the family has furiously protected what it sees as its right to top jobs at the company - with varying degrees of success.

The ineffectual and dyspeptic Edsel was president of the company between 1919 and 1943, but it was clear that his father still ruled the roost and it was said by critics at the time that Edsel had "no stomach" for the automobile industry. Appropriately enough, a model named after Edsel became one of Ford's most disastrous sellers and is still viewed as the worst failure in the industry's history. When Edsel died in 1943, Henry even reassumed the role of president for two years at the age of 79 - despite growing signs of senility - before family members finally retired him.

Only Henry's grandson, Henry II - Hank the Deuce, in company lore - comes close as an effective leader, dragging the company into the modern era, hiring "whiz kids" to bring Ford's designs up to date and undoing some of the damage done by his grandfather's stubbornness, such as a refusal to recognise the unions, to offer credit to allow customers to buy more expensive models, and to diversify the ranges. In 1956, he floated the company on the New York Stock Exchange, raising $650m, and ensuring a life of playboy luxury for family members who decided not to join the firm.

Except for the years between 1979 and 1999, members of the family have always run the show, and even during that period the family was actively involved. By stepping down from the chief executive job after five years, Bill Ford has been able to lure in an outsider - not just a company outsider but, almost unprecedentedly for the American car industry, an industry outsider.

Alan Mulally comes from Boeing, where he cut thousands of jobs from the commercial aircraft division, but already investors are nervous about how much room for manoeuvre he will have while Ford remains "executive chairman". A cousin, Edsel Ford, is also on the board, and the family continues to have the final say through their block of voting shares. The family also has a habit of falling out with non-family executives. Bill Ford himself only became chief executive after forcing out Jacques Nasser, an industry veteran.

But Wall Street has been losing patience with Ford's leadership. Since 2000, the company has been losing its share of the core American market that it owned in its heyday. Barely one in six cars sold in the United States today is a Ford (or one of its other brands - Aston Martin, Jaguar, Land-Rover, Lincoln, Mazda, Mercury and Volvo) and in July, it suffered the humiliation of having Toyota outsell it for the first time. (Toyota overtook Ford as the number two carmaker some time ago in the rest of the world, after General Motors.)

What has gone wrong? In short, Ford - like its neighbour in Detroit, General Motors, and in common with such a lot of industry in the US rust belt - has become uncompetitive. Its 300,000 workers cannot produce cars as cheaply as rivals in Asia, and the company has been hamstrung by the costs of pensions and healthcare for generations of earlier workers. Gas-guzzling SUVs and pick-up trucks, the mainstay of Ford's production lines, have fallen out of fashion in the rest of the world and may even be doing so in the US now that soaring petrol prices are forcing drivers to think greener.

Bill Ford lives and breathes the company. He makes lists of its strengths and weaknesses while he jogs in the early morning. He has been its public face and cheerleader in the manner of his great-grandfather. But observers have worried that he is too encumbered by the past to make the bolder steps required to slice off the flab, to shrink the company to what has to become a more realistic size, to accept that fewer people will buy Ford cars.

He has made the right noises, moved in the right direction, slashed car production this year to try to stop over-supply from driving down prices, cut 30,000 jobs and promised still more and factory closures, too. But the North American business seems stuck in the red, with sales going backwards. Previously untouchable trophies like the Aston Martin brand have been put up for sale to help clear debts, and even the UK-based Jaguar may be on the block in the coming months. Bill Ford finds this shredding of the company's history more painful than any outsider might.

There was much talk yesterday of the teamwork and the co-operation that is to come. "I would not have come to the company if Bill Ford was not staying as chairman," Mr Mulally said diplomatically - but the question remains whether Mr Ford can resist using his family's power to apply the brakes. Ford styles itself as "a company where 'family' has a much broader meaning, referring to far more than just those with the last name 'Ford'." Bill Ford's unprecedented decision to cede control of his great-grandfather's legacy will test that rhetoric.

Only the name remains

J Sainsbury PLC

The first Sainsbury's supermarket was founded by John James Sainsbury in 1869. In 1998, and with an expanded portfolio of businesses, the management passed out of family hands with the retirement of its then chairman David Sainsbury, now a Labour life peer. Around 30 per cent of the shares are still family-owned. The Sainsbury family has become known for its philanthropy, particularly in the arts. Examples are the Sainsbury Wing of the National Gallery and the University of East Anglia's Sainsbury Centre.

Woolworths

In 1878, a young entrepreneur from New York named Frank Winfield Woolworth had a revolutionary idea. He would open a store where the prices for each item were fixed at either five cents or a dime. The idea was a success and Woolworth's became the quintessential family store, run as an archetypal family business. It all came to an end in 1997, when Woolworth's in America was forced by competition to close all its stores. Frank Woolworth's granddaughter, the multimillionairess Barbara Hutton, built Winfield House in Regent's Park, naming it after her grandfather. She sold it to the US government for $1, and it is now the residence of the US ambassador in London.

Krupp

Now part of the ThyssenKrupp AG conglomerate, the name Krupp is synonymous in Germany with steel. The company was founded by Friedrich Krupp in 1811, and his son Alfred, known as the Cannon King, began producing weapons in the 1840s. During the First World War, Krupp was criticised for selling arms to both sides, but after Hitler came to power in 1933, it became the centre for German rearmament. After the Second World War, Alfred Krupp was tried for war crimes and convicted of using slave labour. He regained control of the business in 1953 until his death in 1967.

Sarah Birke