Ford Motor Company: Business Analysis and Recommended Strategies

The Ford Motor Company’s Lincoln marque has fallen far since 1998, the last year it was the top selling luxury automotive brand in the United States. These days, the segment is dominated by BMW, Lexus, and Mercedes-Benz with Audi, Cadillac, Acura, and Infiniti also outselling Lincoln.

Previously, you read about the industry analysis of the beer, wine and liquor industry and the five forces that affect a firm’s ability to serve consumers and turn a profit. Next, successful companies must recognize and respond to the major forces affecting our macro environment, for example; stock market decline, increase in unemployment and global warming. Companies must now consider several external environmental forces while running their business, in particular, demographics, economics, social, natural, technological and political.

The figure illustrates that Australian is among the highest labour country as compared to other higher automotive countries. Car industry workers in Australia are waged About $50 an hour when all taxes, privileges and other benefits are included, compared to $32 an hour for industrial workers across all sectors. According to local factory sources, labour financial statement for 65percent of an automobile’s manufacturing cost in Australia. The budgets of producing motor vehicles in Australia is more as compared to some other countries. Holden Ford and some other countries stated that the cost of motor vehicles trade in Australia is two times higher than in Europe, and four times higher in Asia. The high cost producer of vehicles is because

Alan Mulally, who was hired as CEO of Ford in September 2006, had not engineered, designed, or built any cars. He came from Boeing. After joining Ford, he devised a plan that identified specific goals for the company, created a process that moved it toward those goals, and installed a management system to make sure the company reaches those goals. Mulally demands weekly, sometimes daily, updates. “Alan's style is pretty relentless,” says chief financial officer Lewis Booth, a 31-year Ford veteran. “He says, ‘If this is the reality, what are we going to do about it?' not ‘We're going to work our way through it.'”

Many companies filed bankruptcy due to the 2006 economic recession. However, Ford was able to stay afloat due to its significant changes in products it had to offer. It gained many befits through reorganizing, extending, and contracting its product line. Currently the economy is showing signs of growth and Ford is confident that it will improve on its performance and profits for years to come. Mullaly stated, “You make less money on smaller cars, but we can make a return”. This will certainly be key to Ford’s success for years to

The first strategy, expand its current activities, was the groundwork which sets up the success of the company from the very beginning. Generally, if a company wants to increase their current activities, it has two ways of accomplishing its goals. The company can grow by increasing its inputs without the aid of any innovation and technological process or by innovating new processes that increase its output without any additional inputs (Mihola, Wawrosz, & Kotsovcová, 2015). In the case of Ford Motor Company, it chose to expand by innovation, particularly through the use of the assembly line. However, that is not the only time that Ford Motor Company has expanded by innovation. Ford Motor Company has traditionally operated in three markets, America, Europe, and Asia. So, after looking at its closest competitors Ford Motor Company decided that in order to expand its operations, it would have to include other markets as well as its current

Alan Mulally’s Restructuring of Ford Motor Company Case Study Alan Mulally received an opportunity to turn around one of the most famous brand names in the United States. Ford was struggling; losing more than 12.7 million in 2006 (Nelson p558) and desperately needed a change. Alan Mulally took the challenge, and stated he would do what many thought was impossible at the time – make Ford profitable. He did just that.

In a present day of global warming, environmental issues, labor unions, and other impacts, the automobile industry is in an era of instability and change. Ford Motor Company has been traditionally considered one of the "Big Three" in the auto industry, but they are not adapting as well as hoped to the changing industry, and will have to strategize to survive in a struggling industry.

Ford Motor Company has a long history, starting in Michigan in 1903. They have focused on designing and manufacturing and have been very successful, however with increasing competition, global markets and over-capacity the company needs to look at ways to improve profitability. The company has implemented various programs and processes to create a lean, responsive system with better consumer forecasting.

To compound matters, the accompanying financial crisis of the 2008 recession spurred the industry to slash costs and boost efficiency. The Big Three scrambled with their own restructuring efforts that included factory closures, divesting of nonperforming models and brands, and most of all – decreasing labor costs. (Davis, 2012) The Big Three, of course including Ford, now were faced with a huge labor machinery that it was not able to sustain – especially with a labor force that is ageing, has relatively higher wages vis a vis foreign carmakers’ workers, as well as very competitive retirement benefits packages.

Beyond planning, cutting costs, globalization these automakers need leadership. In the long run we may see new technologies that improve the American auto industry’s power but for now what the industry is a leadership. In recent months ford hired a number of new executives to head key areas related to North American operations, such as product development, marketing, engineering and manufacturing. GM has done the same. One person shaking things up at GM is their newest director, Jerome York. The 67-year-old former auto executive has helped engineer turnarounds at Chrysler and International Business Machines Corp. He has been going over financial statements, seeking new engines and transmissions, and has even met with GM 's labor-relations executives to deal with the tense negotiations with the United Auto Workers, which is another ongoing problem for the company. Outside directors are increasingly looking to him to set the tone and agenda (The Wall Street Journal, 5/1/2006). That is what GM needs, leadership that understands the automobile business and is willing to fight for survival.

The Ford Motor Company was founded in 1903 by Henry Ford and it is currently located in Dearborn, Michigan. Ford is in the auto making industry producing affordable cars under the brand of Ford, and luxury cars under the brand of Lincoln. Ford has a long term rating of Baa3 by Moody’s, meaning that it barely met the standard of being an investment grade and is subject to moderate credit risk. Almost all the Ford Bonds in Pimco’s portfolio have the time to maturity and duration.

The USA has an active automobile industry, and this is attributed to the availability of a market for the cars. “In 2015, the auto sales record were broken in the USA, a new record of 1,641,913 vehicles were sold up from 1,507,229 in 2014. Ford Motor Co. was among the top sellers with their sales standing at 237, 606” (Automotive News, 2016). The quality of automobiles in the USA has been improving thanks to the policies adopted by the government and the competition between players to produce quality vehicles.

Ford's current chairman and CEO, Bill Ford has a simple strategy, "Our vision for the future is simple: We want to build great products, a strong business, and a better world." Ford's vision is, "To become the world's leading consumer company for automotive products and services"

As a financial analyst who is providing advice to a client, one will perform research to several companies using information provided by independent firms. The analysis will explain the details of financial information, as well as make recommendations on their values as investments (Lasher, 2014). Although there are thousands of publicly traded companies, one will only research the following four companies: Ford Motor Company (Ford), Harley-Davidson, Inc. (Harley), Starbucks Corporation (Starbucks), and Microsoft Corporation (Microsoft).