CHICAGO -- At the oldest operating Ford Motor Co. assembly plant, some of the key principles that guided Henry's Ford's company for generations are being turned on their heads.

The Chicago Assembly Plant began life in 1924, turning out the Model T, the car identified with Mr. Ford's idea of mass production. Now the factory itself is a model.

It's a centrepiece of the auto maker's strategy of moving to flexible manufacturing -- a strategy that will transform the company's operations in Oakville, Ont., later this decade if financial negotiations between Ford and the Ontario and federal governments reach a successful conclusion.

"We think it's an excellent model," Roman Krygier, group vice-president of global manufacturing and quality, says as he prepares to guide reporters on a tour of the rebuilt Chicago plant. "We're going to build off this concept."

Flexible assembly reverses one of Mr. Ford's precepts that underpinned the U.S. auto industry for most of the 20th century -- producing hundreds of thousands of the same vehicle to keep costs down. Instead, modern, leading-edge plants turn out several models off one or more platforms (the basic underbody of a vehicle).

Production of those models is increased or trimmed quickly as consumer tastes change.

Ford and its Detroit-based rivals General Motors Corp. and the Chrysler division of DaimlerChrysler AG are playing catch-up to Honda Motor Co. Ltd., Nissan Motor Co. Ltd. and Toyota Motor Corp. of Japan, which have been operating flexible plants for more than a decade.

Flexibility is simply the price of entry in auto manufacturing today, says Michael Robinet, vice-president of global forecast services for consulting firm CSM Worldwide Inc. in Northville, Mich.

"Putting in flexible production facilities mainly keeps Ford on pace with the balance of the industry," Mr. Robinet says. "I can assure you that Honda, Toyota and Nissan are continuing to move flexibility to new levels."

At the Chicago assembly plant, at three U.S. pickup truck plants and potentially in Oakville, the plan is to build several models off one, two or three platforms.

"Oakville is an opportunity the company thinks is of value to us," Mr. Krygier says of a $1.2-billion proposal to redevelop the site. That plan centres on the Oakville Assembly Plant, which is now dedicated solely to production of minivans off a single platform. It would be replaced by a new, flexible plant employing about 4,000 people and operating on three shifts a day. Ford celebrated its 100th anniversary in Canada this week.

In Chicago, flexibility starts with the Ford Freestyle crossover utility vehicle (CUV), which combines the ride of a car with the cargo-carrying capability of a sport utility vehicle; the Ford Five Hundred full-sized sedan, which the company is already describing as its new flagship car; and the Mercury Montego, another full-sized sedan built for the upscale Mercury brand in the United States.

All three are built on the same platform. A fourth model is planned. At full flexibility, the plant will be able to turn out eight models from two different platforms.

"I can flex that model in," Mr. Krygier says about the fourth vehicle, which so far is unnamed.

One key feature is the ability to react quickly when the market shifts, if, for example, CUV sales slow and passenger cars become hot again.

"We can vary the product for what the marketplace tells us," says Greg Smith, Ford's executive vice-president and president of the Americas.

So instead of 200,000 or 400,000 Model Ts, or Taurus sedans, to use a more recent model, Chicago will turn out 250,000 to 300,000 cars or CUVs, depending on what's hot.

It also helps address the problem of having factories operating at less than full capacity.

"You run six plants at 90 per cent [capacity] instead of seven plants at 75 per cent and still produce the same number of vehicles with the same quality, but using fewer people and less fixed capital," Mr. Robinet says.

At various points on the assembly line in Chicago, another of Mr. Ford's dictums is discarded -- that customers can buy a car in any colour they want so long as it's black.

At one point, workers buzz around a red Freestyle that's followed by a tan Five Hundred, then a blue Freestyle. Further along, a blue Montego rolls ahead of a white Five Hundred and a red Freestyle.

The new system dramatically cuts capital expenditures when plants are retooled for the next generation of vehicles, Mr. Krygier says.

Instead of tearing out and replacing an entire body shop at a cost of $200-million (U.S.) to $400-million, all that's needed is new tooling and reprogramming of the robots that weld a vehicle body together.

Capital spending is reduced by 50 per cent when the same platform is used for a next-generation vehicle.

Switching 75 per cent of Ford's North American assembly plants to the flexible system will save the company $2-billion over 10 years, Mr. Krygier adds.

It also dramatically reduces the amount of time a plant is shut for retooling and thus not producing any revenue.

"The old system would take months," he says. "Now we're into weeks."

Lack of flexibility, on the other hand, is expensive.

Chrysler found that out in 2000 and 2001, when its PT Cruiser was the hottest-selling vehicle, but the Toluca, Mexico, plant where it was assembled was running flat out.

Another Chrysler plant in Illinois that assembled the compact Neon had a paint shop that was just a few centimetres too short to build the taller PT Cruiser.

That cost Chrysler about 80,000 PT Cruiser sales and an estimated $240-million in pretax profit, according to Prudential Equity Group Inc. auto analyst Michael Bruynesteyn.

The Chicago Assembly Plant was turning out Model Ts three years before Mr. Ford completed his industrial masterpiece, the giant Rouge River complex in Dearborn, Mich., where iron ore, coal and limestone arrived at one end and finished vehicles came out at the other.

That classic example of what he saw as essential vertical integration has been abandoned because parts makers now supply large chunks of the Freestyle, Five Hundred and Montego.

But Mr. Ford's idea of producing a vehicle's components close by has been resurrected with a supplier campus less than a kilometre away from Chicago Assembly, where 155 acres of vacant land in a decrepit industrial park are now occupied by 12 parts makers.

The 12 companies, including Decoma International Inc. of Concord, Ont., and London, Ont.-based TDS Automotive, provide about 60 per cent of the parts that go into the three vehicles.

Ford and the suppliers invested $250-million in the park, which it is calling the largest in the auto industry in North America.

It's another cost-saving measure.

The concentration of suppliers nearby means the average part travels just 193 kilometres to reach the assembly line, compared with 740 for the previous models.

That amounts to a saving of two million gallons of diesel fuel and the equivalent of $50 a car in freight costs. Based on output of 250,000 vehicles, that's $12.5-million in costs trimmed.

In the supplier park, interiors giant Lear Corp. turns out vehicle ceilings--known as headliners -- every 10 minutes.

When they reach Lear's shipping dock, they have 84 minutes to get to the assembly line where they're matched up with the vehicle for which they were built.