Ford Motor Company is an American multinational automaker headquartered in Dearborn, Michigan. It was founded and incorporated by Henry Ford on June 16, 1903. The company sells automobiles and commercial vehicles under the Ford brand and most luxury cars under the Lincoln brand. Ford also owns Brazilian SUV manufacturer Troller, an 8% stake in Aston Martin of the United Kingdom and a 32% stake in Jiangling Motors. It also has joint-ventures in China, Taiwan, Thailand, Turkey, and Russia. https://binged.it/2IC0xrJ Globally, Ford is currently the 5th largest automobile manufacturer and has set its goal to be the top player.
Ford is currently evolving from its One Ford plan focused in part on a moving to a more global platform which implemented in 2007 by former CEO Alan Mulally, and could be credited for keeping Ford from filing for bankruptcy in 2009 along with their competitors: GM and Chrysler. In 2017, Jim Hackett expanded Ford’s business plan for driving change. This includes a Climate Commitment for the reduction of greenhouse gas emissions and by using sustainable materials, Changing the Way People Move by scaling up electrification, smart vehicles for a smart world, and building the city of tomorrow, Changing Lives for the Better a force for good, and transparency throughout the supply chain.
“We have always believed that freedom of movement drives human progress, which is why we aspire to be the world’s most trusted company, designing smart vehicles for a smart world. As we look to the future, we will move from reducing our impacts to contributing positively on the environment while also making people’s lives better through greater mobility, more connectivity, less congestion and reduced emissions.
” Jim Hackett, President & CEO
In January 2019, Ford shares have gained 12% but are down 29% in the past 12 months. Some investors might be interested in purchasing Ford stock at its current low price, but several financial analysts are predicting that it’s a risk and any return would be long-term.
The company’s automotive brands which include Ford and Lincoln produces or distributes automobiles around the world (across six continents). 1 The company employs approximately 202,000 employees, which includes 65 plants and the financial services sector through Ford Motor Credit. 1 In order for ford to function successfully the company must be able to staff accordingly to meet the standards of the customers and or the cars dealers.
Ford aspires to captivate candidates that are diverse and qualified to handle the jobs they are hired to do. 2 In order to do this ford attends meeting in communities and builds relationships in which expands the participation with the corporations and the individuals themselves.2
In order to retain the employees at Ford, they must attract the individual. What is most important to the individual when employing a job at Ford, is the development and internal job opportunities available that will grow the talent of the individual. This enables them to be productive in their success for the future at Ford. Diversity is very important as it reflects on the society with live in, which enables Ford to build a stronger environment. 3 Keeping the best on board at Ford means providing a wide range of formal and informal opportunities for training.“Coming together is a beginning; keeping together is progress: working together is success.” 4 This is a quote from Henry Ford the founder of Ford Motor Company. “Having an engaged and high performance workforce is the key to a successful company”(Tolero,2018). The more employees that are satisfied the better they are to perform the duties assigned to them. This means more profit for the company. The profits that are made can go into investing in innovations which would make ford a leader in new products. This is why the quote from Henry Ford is so important to the Ford brand.
Research and development is important for Ford, the company needs to stay ahead of the playing field with other car companies. Anyone at Ford Motor Company within the first year of entry level work are able to deliver an idea. If the group of researchers think that an idea benefits pursuing, Ford will assist the employee in having their idea patented. 5 Ford has a desire to inspire employees to build ideas that will fuel theirs and Ford’s success.
Health and safety culture is very important by understanding policies and procedures and having focus group meeting in regards to injury or hazardous situations in which appropriate corrective actions can be taken to keep the employee safe. 6 Loss of life or serious injury in unacceptable at Ford and as a company they try to keep the numbers down. From 2015 to 2017 the numbers went down globally, but in the manufacturing sector, the number went up by one percent. 6 With this in mind, keeping employees informed will benefit in bringing hazardous situation numbers down.
Ford’s culture defines the values and customs and traditions which affect the behavior. Ford has come up with four main characteristics for their culture: 1. Foster Functional and Technical Excellence – Support Innovation and push performance to a high level. 2. Own Working Together-Personal development through support of the team and the organization itself. 3. Role Model Ford Values-Build integrity with positive behaviors among workers, this focuses on sustainability across the organization. 4. Deliver Results-Effectiveness and satisfying customers by employees achieving higher levels of career development. These for examples spell out F.O.R.D. Which ford stands by as their organizational culture.7
In the future months to come Ford expects to cut jobs in a restructuring plan to cut its global salaried workforce. Ford has been examining where there are layers of work being duplicated. Ford is expected to gather this information and start the cuts by the second quarter of 2019. 7 “In 2017, Ford lost $784 million in South America; lost $263 million in the Middle East and Africa; and made $234 million in Europe, a trend there that appears to be reversing this year. North American profits helped the automaker post a $7.6 billion profit for the year, underscoring the need for global restructuring”. 7 Thus this is the reason for the global restructure. The money that is being saved from the global restructure will give the automaker money for many new products through the year 2023. 7
The financial health of a company consists of many avenues. When looking at Ford Motor company since the first public offering on January 18, 1956 the stock has split six times. (Ford Motor Company-Stock Information. 2019). In May of 1962 it split 2/1, 1977 5/4, 1983 3/2. 1986 3/2, 1988 2/1 and in 1994 it again split 2/1. Ford seemed to be doing very well. In 2006 Ford lots 12.7 billion the worst loss in the company’s history. (NBCNEWS, 2007). At that time Ford claimed that sales of their most profitable vehicles were down because gas prices were so high and these larger vehicles were reported as “gas guzzlers” (NBCNEWS.com 2007). Ford’s plan in 2008 to restructure did not go as planned. Fast forward to 2018 there is yet talk again for a 25.5 billion restructuring plan. Kevin Kelleher of Fortune states that “stock prices are down 29%, and the tariffs imposed by President Trump have reportedly cost the company $1 billion”. (Fortune, 2018). As part of Fords plan to reorganize they plan to cut over 200,000 worker’s globally.
More recently, Ford has announced that they plan to invest 1 billion dollars and create 500 jobs in its Chicago assemble and stamping plants (NBCNEWS, 2019). As part of this plan Ford plans to cuts out some of their Europe division that Ford claims for losing money in (Detroit Free Press, 2019). Part of Ford’s plan is to stop production on sedan’s and focus on SUVs and trucks. Ford claims that this will bring in a higher profit margin. When you look at Fords income statement from 2013 – 2017 they have continued to see a steady growth of revenues in the U.S. So why does a company that continues to produce revenues show a net profit loss? This is due to a wide range of costs such as tariffs, recalls, EPA citation, tax issues, and lower global sales.
The U.S. market may be considerably different from a global market, there are many factors to consider. Fluctuations in the foreign exchange rates, recession, and a financial crisis can have a significant effect on the results of a company who has not realized and managed their exposure to them. In a very short time, a stable financial system can suffer a financial crisis that may change the currency rates, commodity prices and even affect interest rates. It today’s markets with an increase in tariffs the cost of imports and exports could have an adverse effect on the profitability of a company. Last year the tariffs are said to be the blame for most of the 25% down fall in China. There are also claims lower sales due to the low product portfolio. Regulatory differences may also have an impact on a company’s bottom line. For instance, when Ford Motor company opened a dealership in Korea and Taiwan, standards for gasoline vehicles are much stringent than that of the U.S. This requires extra money for testing to make sure that emissions are equivalent.
Many countries will give incentives to encourage new business to reside in their country. These incentives come in the form of grants, loans, and tax abatement or credits. Many employees in the U.S. and Canada are represented by unions and are covered by collective bargaining agreements. As part of these contracts and terms, many U. S employees also are proved with benefits such as pensions, health care, and life insurance. Going global may allow more flexible to negation wages and benefits. A competitive cost that affects labor constraints may be an incentive to move your company globally. In many cases, a U. S company will go into business with an existing company. Companies like Ford Motor Company have joint venture partnerships with countries such as Taiwan, Netherlands, Vietnam, Thailand, and China to name a few. In places like the Netherlands, the business agreement is a 50/50 split, with Ford Motor Company having the main control. By entering into a business contract like this, you can get your product into another country while sharing the risk. This would include sharing the cost of assembly plants, distribution centers, and sales or administrative offices. In many cases like with Ford, they will own a portion of a building and lease it out. This way they can benefit from any incentives the county may be offering.
The world used to be a vast place before the use of technology. In today world, it is very easy for people to see in “real time” when something goes wrong. When it comes to environmental laws, it’s imperative that you understand the regulations. What might be okay in one country may be considered hazardous in another. This happened to Ford Motor Company when they used asbestos in their brakes, clutches, and other components in the early 1900s. At this time Ford has listed in its financial statement that there is legal proceeding that exceed 100,000: There is also an outstanding notice of violation from 2015 issued by the EPA in violation of requirements to its air permit. Monetary sanctions have not been determined as of yet. You must always keep in mind what you do today will affect how the world sees you tomorrow.
Ford also is dealing with recalls such as misassembled fuel pressure sensors and transmission casing that stretch from the U. S. to North America. The estimated recalls for just 2018 and 2019 alone were somewhere in the range of 114,301 vehicles effected. This will come directly of Ford’s bottom line.
When it comes to competition Ford has many strengths. Those strengths are the internal strategic factors within the brand itself. First there is a strong brand image, there is “brand love” with the customers and Ford is continuing to stay strong with that image, but with that also establish a new customer base. Fords Global supply chain around the world is very robust and the operations help support each other around the globe. Ford also continues to evolve in the innovation process as stated in the employee’s section of the paper, the employees are the innovators.
Ford does have some weaknesses which hit the business hard at times. This happens to be the many recalls on their vehicles. Also, if you look at Toyota and Honda, the models/look of the cars change from year to year. The look of Ford’s automobiles changes every five years.
Ford has many opportunities to create vehicles for the hybrid market, but sometimes falls short as the C-Max which was supposed to be the brands hot new hybrid car but turned out to be a failure (does not compare to the Toyota Prius thus that is why it failed). India and China’s markets are growing and if they were able to merge into those markets at a faster pace this would be a great opportunity.
Threats facing ford are based on external strategic factors which in includes Toyota and Honda. They are very aggressive in being competitive with the Ford brand. They have aggressive market and innovation. Oil prices are also a threat which endangers the sales of ford products which most of the engines in Ford have internal combustion.
Ford most definitely needs to address the research and development investments as increasing the speed of the innovation process will address issues the company is having with intrusive competition The public really does not see many electric/hybrid cars from Ford as people see from other automobile companies. As people try to save money on gas and want more fuel-efficient cars, those people tend to look at Toyota and Honda for the hybrids. Once Ford does its Global restructuring, the company may have a plan in place to focus on the electric cars and new lines of their automobiles.
Ford has an extensive portfolio of vehicles including the new Ecosport and redesigned Edge SUV. Also, the family of the six Ford trucks in 2019 which is their most popular line. Ford also owns the Lincoln brand of cars which is classy and elegant (made popular for the mature generation). From now through 2023 Ford is going to put their research and development into new lines of vehicles and also focus on electric cars.
In 2014 Ford was acclaimed a top American automaker in overall customer loyalty – estimated at 64% returning customers. https://www.cnbc.com/2014/07/02/car-buyers-are-most-loyal-to-these-brands.html?slide=11 Many consumers felt they produced a wide variety of reliable vehicles at a reasonable price. By 2018 that estimate has decreased significantly to 48% which the company has worked to curtail further decline by focusing on the emerging global customer wants/needs. Additionally, to reduce costs and keep products at their lowest price possible Ford has been limiting production to their portfolio of vehicles those that are better selling. Additionally, to be competitive in the global market they have increased their development efforts focused on improving mobility & technology to produce high quality, smart, and safe vehicles for everyone – across the globe.
In 2019 Ford will launch “FordPass” an app, cloud-based software platform, aimed at revolutionizing mobility for consumers and transforming Ford into both an auto & mobility company.
FordPass is a free is a free app featuring four benefits for members: Marketplace includes mobility services such as parking and sharing; FordGuides help consumers move more efficiently; Appreciation, where members are recognized for their loyalty; and FordHubs, where consumers can experience Ford’s latest innovations. FordPass will also allow Ford owners with SYNC® Connect technology to remotely start, lock and unlock, and locate their vehicle – capabilities that will play a key role in future mobility services. https://pivotal.io/platform/press-release/ford-pivotal-collaborate-software-platform-fordpass
Customer expectations are not what they used to be. The car industry has evolved to meet these new expectations, but have they evolved enough? Companies like Tesla disrupted the industry with all ‘green’ and self-driving cars. Not only do they serve two new ideals, they look and feel luxurious as well. How is Ford supposed to compete (and win) against disrupters like Tesla?
Ford has already made some crucial strides towards this goal. In 2018, they announced that they are discontinuing some of their models (like the Ford Fiesta, Fusion, Taurus, and C-Max) due to declining sales. Customers aren’t looking for large, or even mid-size, sedans anymore. With extra room in the budget, they will be focusing on trucks (like the F-150), SUV’s, and of course Lincolns. By 2022, they plan to launch several battery/electric only models. While these moves are necessary for the success of Ford, there are some other things they could be doing.
To cut down on expenses, Ford needs to revamp its international business. Outside of the US, Ford operates largely in Europe, China, and South America. If an F-150 doesn’t sell well in a different market, don’t bother going to the expense of producing it. Do more studies to find out what cars are selling well and make models based on that. In one article, Ford’s Executive Vice President of Global Markets said “China is the largest automotive market in the world, and we think it could be twice the size of the US by 2025. So, getting our business back on track is essential.” It could also do well to partner with a well-known name that local customers will trust.
Ford partnered with German automaker Volkswagen. They plan to release vans and medium size pickup trucks as early as 2022. Ford once stated that they anticipate investing $11 billion in product development; Volkswagen estimated more than $50 billion. Ford CEO Jim Hackett said in an interview “You can’t do this alone. All these efforts are enhanced by sharing brain power.” There is such a green push in the automotive industry (self-driving, fuel efficient, electric, etc.) that two heads are better than one. This is especially true in a foreign market. This partnership could revolutionize Ford’s presence in Europe. Ford should be looking for partners in China if they wish to remain in the Chinese market.
The next big change Ford should focus on is dealership profitability, or lack thereof. Dealerships are simply not seeing enough profit, for one reason or another. This is particularly true in China. Only one out of three dealerships in China are profitable. What would car sales be like if dealerships were eliminated altogether? There would be significantly less expenses to keep up with, with potentially the same money coming in. Most dealerships keep about 200 cars on hand. How many of those do they sell? Most customers are already browsing online and go to the dealership just to finalize their purchase. Besides, “car salesmen” have a notorious, negative connotation.
What if the purchase process began something more like a pizza delivery? A customer could browse cars online, pick what they like, and within a few hours, the salesmen shows up at their doorstep in the vehicle they chose, ready to test drive. If all goes well, the salesmen could have all the paperwork ready for the customer at the same time. In this scenario, all Ford would need is an easily navigated website, warehouse to store cars, and someone to drive/sell to the customer. If the staff is properly trained and incentivized, they could even shake the “old school, pushy sales environment and reputation.”
Another aspect Ford should focus on changing is production. An article from CNBC summarizes the situation nicely by saying “automakers typically build where they sell, but sometimes import and export vehicles from one country to another. The ongoing trade ware has not been kind to the business, primarily driving up the cost of materials. Tariff’s alone cost Ford $750 million in 2018.” If Trump continues to raise tariffs, it is forecasted to be over $1 billion for 2019. If Ford shifted focus to a local supply of the needed materials and assembly processes, they could eliminate their tariff expense altogether. If they could find everything they need in the same market they plan to sell in, there would be no need for importing and exporting. It will also be good for local economies and would make a good selling point with local customers. Ford could keep the price the same on all vehicles, manufacture them for less, and see higher profit yields on each and every car they make.
In a nutshell, there are many considerations when restructuring. You must look at risk factors such as the foreign exchange rate, recession, and regulatory differences. There will also be some incentives that may help balance those risks such as grants, loans, and tax credits.