After the end of the First World War, a crisis broke out. People didn't have money to buy cars. The previously successful Ford Motor Company business went downhill.
By the start of the crisis, Ford had $33 million in debt. Another $18 million was required to pay income taxes and $7 million for workers' salaries. The company's bank account at that moment was only $ 20 million. Henry Ford planned to pay off debts from the profits. However, the sharp drop in demand for cars not only led to a decrease in sales, it made production unprofitable.
Henry Ford began to look for other ways out of a difficult situation:
1. Reduced prices immediately by 20%
The company needed to bring back demand for its cars. Henry Ford decided to resort to the biggest price cut in the history of the automotive industry: 20% cheaper - the price of $440 was even lower than their cost. This was supposed to return the interest of consumers. But Ford Motor Company faced the national crisis - sales continued to fall.
2. Cut staff
During the First World War, the staff of office workers grew strongly due to government orders for military products. By 1920, the need for them disappeared, as the company completely returned to civilian industry. Some white-collar workers were dismissed.
3. Sold unprofitable assets
It turned out that the Ford Motor Company still had military loans and finished goods. In addition, the company had property abroad, which did not bring profit. It was decided to sell all this at once to get money.
4. Changed inventory management strategy
The company's management felt that costs could be reduced by accelerating turnover and efficiency of inventory management. At that moment, one of the factories of Ford Motor Company accumulated components and spare parts worth $88 million. They began to implement the Just-In-Time Delivery strategy, which involved the timely delivery of all spare parts to factories and finished products to dealers, by taking into account the existing work schedule, an established delivery system and the railway.
5. Began to impose additional components on dealers
Henry Ford's company shipped new cars to dealers just in time, but included large stocks of parts that were often not ordered. Dealers had to pay immediately and in full. It was impossible to refuse, since cooperation with the Ford Motor Company was considered profitable and promising. Faith in the company did not allow cutting ties with it, which Henry Ford took advantage of.
6. Asked for deferred payments
The company's suppliers were in a similar position. Henry Ford requested for himself a deferral of all payments for at least a month. Nobody refused him, since the loss of such a client could lead to negative consequences in the future.
Thanks to the above measures taken, by the spring of 1921 the company had paid off all its obligations and gained $20 million in profits. The crisis was over. The Ford Motor Company remained the property of Henry Ford.
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