Elon Musk just made it clear that a legendary Ford plant is inspiring his ideas about how to reimagine factories (TSLA)

Wikimedia Commons

• Tesla CEO Elon Musk admired Henry Ford’s most famous factory.
• River Rouge was a model of vertical integration.
• Musk wants to replicate it in the 21st century with Tesla’s factories.

Tesla CEO Elon Musk wants to reinvent the factory. In fact, as he made clear on a conference call after the company reported fourth-quarter 2017 earnings, he wants to make factories his most important product.

Automation is key. And Henry Ford and his most famous factory is his inspiration.

“The Model T wasn’t the product, it was River Rouge,” Musk said, in response to an analyst’s question.

“Anybody could make the Model T,” Musk said. “Not everybody could make River Rouge. The factory is going to be the product that has the long-term, sustained competitive advantage.”

Way back in 2014, Tesla outlined how it’s massive Nevada Gigafactory, where it manufactures batteries, might work. In a letter to investors, the company wrote: “Processed ore from mines will enter by railcar on one side and finished battery packs will exit on the other.”

Anyone who knows the history of the auto industry will recognize in that description a possible reference to River Rouge, a sprawling facility that for decades symbolized the might of the US auto industry and the virtues of “vertical integration” in manufacturing. This is a simplification, but for all practical purposes, iron ore went in one end and finished cars rolled out the other. Everything required to build an automobile was on-site.

The gargantuan plant operated until 2004.

Tesla’s ambitions for the Gigafactory are huge. It’s been noted by industry observers that if the company succeeds in building 500,000 vehicles per year, there won’t be enough lithium-ion batteries in the world to supply its needs. So Musk and his team must build the battery capacity that the globe currently lacks.

As Tesla strives to increase production, Musk has begun to stress that more vertical integration is the way forward for the car maker. This runs counter to a multi-decade trend in the auto industry, where so-called “lean” or “just in time” manufacturing has been the preferred operational mode.

Check out these images and stats from the River Rouge factory (they’re from an old film that’s on YouTube — it’s worth watching but, at a half an hour in length, is a bit too long to embed here).

The factory was literally located on a river — the Rouge River in Dearborn, Michigan, where Ford still has its HQ.

Wikimedia Commons

It consisted of nearly 100 buildings.

YouTube

That many structures required a lot of glass, to provide light and ventilation!

YouTube

Materials were moved in and around the plant by a vast network of railroad tracks.

YouTube

It goes without saying that the symbol of America’s industrial age was a major employer in Michigan.

YouTube

But in many places, those employees were dwarfed by the plant’s impressive machinery.

YouTube

Get the latest Ford stock pricehere.