Term Paper on "Ford Motor Company Ford Report"

Term Paper 13 pages (3702 words) Sources: 20 Style: Harvard

[EXCERPT] . . . .

Ford Motor Company

Ford case study report

Q.1 to what extent did a) the light trucks segment b) the operations of Ford Credit create opportunities and problems for Ford in the late 1990's and 2000's?

To what extent do these developments suggest more continuity than change of strategy between the Jacques Nasser and Bill Ford periods?

Ford Motor Company entered the business world on June 16, 1903, when Henry Ford and 11 business associates signed the company's articles of incorporation. With $28,000 in cash, the pioneering industrialists gave birth to what was to become one of the world's largest corporations. Few companies are as closely identified with the history and development of industry and society throughout the 20th century as Ford Motor Company. Perhaps Ford Motor Company's single greatest contribution to automotive manufacturing was the moving assembly line. First implemented at the Highland Park plant (in Michigan, U.S.) in 1913, the new technique allowed individual workers to stay in one place and perform the same task repeatedly on multiple vehicles that passed by them. The line proved tremendously efficient, helping the company far surpass the production levels of their competitors -- and making the vehicles more affordable. Henry Ford insisted that the company's future lay in the production of affordable cars for a mass market. (Ford Motor Company).

But a lot has changed since Henry Ford first founded the company and Ford Motor Co. has lost a lot of its competitive advantage on the U.S. auto market, especially to the benefit of General Motors their most powerful and enduring competitor.

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It seems that Ford has been facing serious problems for quite some time.

In the 90s Ford automotive" is the tale of two businesses where North America automotive made all the money while Ford's substantial European cars business stumbled between losses and breakeven. As U.S. demand for "light trucks" (i.e. sport utilities and pickups) boomed in the 90s, Ford held a market leading 33% market share and the F150 pick up (full size, V8 and auto) was America's best selling automobile. Even with this boost, Ford doesn't make enough money for the stock market."(Ford Case Study)

In January 1999 an important change occurred at Ford, Jacques Nasser took over as CEO, after having joined the company in 1968 and having worked for the last 30 years in Asia, Latin America and South Africa. Nasser wasted no time in announcing the major changes he wanted to implement there. He was determined to turn Ford from a car company into a consumer company and not only that, but he also ventured to promise that shareholders were going to receive better returns from services. He was ambitious and determined and hoped to surpass General Motors their number one rival.

Ford wants to become the "and" company that delivers the highest quality products and the best customer satisfaction and the best shareholder returns."(Ford Press release, 14th July 1999)

By the end of the year 1999 the new strategic moves that would improve Ford's profits and market share according to Nasser implied most of all a change of perspective. <> (National Press Club, 27th July 2000)

It was his belief that Ford should "think about the demand for motoring not the supply of cars:

capture more of the expenditure on motoring, which includes financing and insuring new cars, recognise that most cars on the roads are second hands, which require servicing, parts and so on.

A concentrate on meeting only those demands, which offer good cost recovery and decent ROCE." (Ford Case Study)

In 1999, Nasser was voted Automobile Industries Man of the Year. (National Press Club, 27th July 2000) Nobody could have then foreseen the damage that Ford was going to endure throughout Nasser's appointment as CEO.

Many of his improvement plans ended in failure, but perhaps his most questioned action has been his acquisition of car brands, such as Land Rover who did not enhance the company's profits, doing nothing else than adding more costs on the overall balance sheet of the company.

Another of his least popular decisions has been to lay down a large number of employees. Thus "Mr. Nasser was known as "Jacques the Knife" for the way he cut jobs, especially in the UK." (BBC News Ford chief Jacques Nasser ousted).

He also implemented some changes with regard to Ford Motor Credit Company.

Ford Motor Credit Company, the world's largest automotive finance company, is a wholly owned subsidiary of Ford Motor Company. Ford Credit provides vehicle financing to more than 10 million customers and more than 11,500 Ford, Lincoln, and Mercury automotive dealers.

Ford Motor Credit Company traces its roots to 1923, when Henry Ford, unwilling to encourage consumer borrowing, experimented with a layaway plan to spur sales of the $265 Model T. More than just a car-loan provider, Ford Credit was established so Ford Motor Company dealers could provide competitive financing services to both individuals and businesses. The brand has been integral in making ownership possible for the many customers who cannot or do not want to pay for the entire cost of a vehicle up front."(Ford Motor Company)

Nasser considered that <>Unfortunately Ford bought service businesses, which were not large enough or consistently profitable so as to deliver significantly improved results.

That is why, only after 2 years of being the head of the company Nasser was replaced. His substitute was none other than Bill Ford. A member of the Ford family had not led the company ever since 1979,when Henry Ford II had resigned. After Nasser's resignation the following were announced by BBC News:" Mr. Nasser's ousting follows reports of serious rifts with the Ford family, which still controls 40% of the board of directors' voting power through stock holdings. Ford has recently lost significant market share and this month reported its first consecutive quarterly loss in nearly a decade.

Ford's results showed it was hard hit by the attacks on New York and Washington with net losses totalling $692m, compared with net earnings of $888m a year earlier.

But even before 11 September, Ford's results were suffering from the impact of the Firestone tyre crisis, a number of other embarrassing product recalls and a highly competitive market." (BBC News Ford chief Jacques Nasser ousted)

Three months elapsed until Bill Ford announced his "revitalization plan "which was in the interim jointly developed by Bill Ford and his new COO, Nick Scheele, who had previously managed the European restructuring under which Dagenham assembly was closed. In the intervening period, a continuing trickle of bad news raised fundamental questions about management control, judgement and capability in operating matters at Ford Motor." (Ford Case Study)

But Ford Motor was not the only one that faced financial difficulties. Nasser had left Ford Credit in a similar situation due to his bad investments. Ford Credit had been used to push product in the late 90s, so that by 2001 Ford Credit had an unusually high proportion of bad loans and losses arising from returned lease cars where Ford had made unrealistically optimistic assumptions about residual values in order to lower monthly payments and increase sales. Residuals were generally a problem for finance companies who had collectively lost an estimated $13 billion on returned vehicles by 2001 (Mannheim Auctions, 2001 Used Car report). But the cost for Ford was that, just when it needed the profits of finance, Ford Motor had to put $700 million in to strengthen Ford Credit's balance sheet and accept that Ford Credit would contribute no profit in the fourth quarter"(Ford Case Study)

Though a change for the better was expected, as Bill Ford became the Chief Executive of the company no improvement could be felt. He was in the end unable to manage things and to deal with problems much differently than Nasser had been. Here are only some of the major events that Ford Motor Company went trough during the year when at first Nasser and afterwards Bill Ford were in command. On the 22nd of May Ford had to replace 13 million Firestone tyres and take a $3bn charge. On the 18th of July the company reported a $551m quarterly loss. Then MrFord takes over on the 26th of July. Four days later Ford's U.S. market share falls to 22%. Then on the 17th of August MrFord uses the same restructuring methods… READ MORE

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Ford case study report Question

1.The Question

Students must answer both questions, and each carry equal weighting of 50 marks.

Q.1 To what extent did a) the light trucks segment b) the operations of Ford Credit create opportunities and problems for Ford in the late 1990s and 2000s? (30 marks) To what extent do these developments suggest more continuity than change of strategy between the Jacques Nasser and Bill Ford periods? (20 marks)

Q.2 To what extent are Ford*****s current (future) cash problems the result of a weakness of competences or poor product positioning, and can Mulally*****s new initiatives solve Ford*****s problems? (50 marks)

2. What we are looking for?

Application of theories and concepts such as financialization, sector matrix move, restructuring

Show practical skills of locating data and understanding the relevant bits

Develop an argument/handle literature critically to present story of company position in context. Avoid being descriptive.

DON*****T

Just pile up loads of facts from sources

Present a limited analysis with a balance sheet in the back

DO INCLUDE

a) Moves and levers (Many moves and few levers: Giant-firm management makes many firm-level moves that ensure an organizational life of ceaseless activity and initiatives, but giant-firm management has few levers that act on the industry to deliver improved financial results for the individual firm )

b) Sectors and industries

Difference between supply chain & demand matrix

Identify where in the field the firm is operating

3.Checklist to help you get a balanced story

a)Levels *****“ good story identifies which levels matter and locates the plot and events accordingly

b)Key evidence *****“ action pivots around key characteristics of the firm/industry which are demonstrated conclusively *****“ how does your evidence/interpretation relate to what others claim?

c)Events, decisions and time line *****“ good story identifies the key events and decision points and is clear about chronology of actions and performance

d)Tone and message *****“ good story has a clear tone (optimistic/pessimistic, romance/tragedy) and is clear about the scope for management action

4. Sources to use

a)Company accounts

b)Brokers***** reports

c)Newspapers, magazines, etc Pick well-known sources, eg Ecomomist, Business Week, rather than obscure ones

d)Commercial reports on particular industries

e)Useful data on market, size, growth, etc, but analytical content often low

f)Also Datamonitor

g)Official documents

--Look at websites of government bodies, also global orgs such as OECD

-- Trade associations eg Wards Autos for cars

*****

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1. Ford Motor Company Ford Report. A1-TermPaper.com. https://www.a1-termpaper.com/topics/essay/ford-motor-company-case/19825. Published 2007. Accessed July 1, 2024.

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