Ford Motor Company
Category : Articles
Corporate Issue Paper
“Failure is simply an opportunity to begin again more intelligently”
– Henry Ford – 1863 – 1947
Summary and Issue Identification
The events as they transpired in the fourth quarter of 2008 may certainly be considered the result of a nationwide economic failure, with the auto industry placed front and center in the full media spotlight, but for Ford it marked an opportunity to show a sense of responsibility and to shine as an industry leader. The ???Big 4??? U.S. automakers would find themselves having to report to Congress the reasons for the collapsing auto industry as well as each having to propose a plan as to how their respective company planned to turn business around and how they would use the bailout money which would amount to more than $100 billion. This tough stance by Congress was, perhaps, a response to the negative criticism and dismal public opinion that was surmounting after the insurance and banking industries had just received an even larger sum without such tough, and well-deserved, questioning.
During the course of the hearings, as the other three major automakers each accepted their cut, Ford chose an alternative solution. Rather than accepting the available bailout money they declined and, instead, presented a four-part plan to recover from their 3-year backslide, thus preserving the hundreds of thousands of jobs that would be affected if Ford Motor Company were to collapse.
The issue Ford is facing is? twofold. Ford faces the challenge of making a rapid recovery from? the toll that the economic recession has taken on? today??™s auto industry? while simultaneously positioning themselves to remain a global leader in the auto industry of tomorrow.
Stakeholders and their incentives
Throughout the domestic automotive market collapse, Ford, and their attention to three particular major stakeholders, enabled the company to remain focused and operating efficiently.
Considering much of the grief within the market came from the treatment of the employees and their wages, the well being of the front line workers for maintaining a strong base by which to continue operating is vital. Recognizing that there was looming issue, Ford began to cutback costly operations in early 2007 and into mid 2008 with the sales of Jaguar and Land Rover (O??™Grady). With the potential loss of 16,000 positions from these two lines alone, early cutbacks may have been damaging to the immediate culture of the corporation, however this early detection could be deemed the savior for the many jobs that are still held by Ford employees. Rather than riding into the storm with overpaid workers and unprofitable lines like other domestic makers have done, Ford??™s choice to scale back early helped them re-identify with their roots.
Although the cutbacks inevitably hurt employee morale during the initial lay-offs, those still employed with Ford must feel a sense of gratitude and security in their positions. To continue to ensure employee well-being, Ford??™s expansive projects to gear up for the future of automotive have created more jobs to replace those which were lost. With the push for greater alternative fuel vehicles, Ford??™s work to create a smaller and more efficient lineup of cars for its consumers has meant more jobs for employees. In this push, Ford has invested $155 million and is adding 1260 new jobs for creation of more fuel efficient vehicles (Ford Invests??¦). Addressing this major stakeholder has been beneficial, as sales in February for Ford cars and trucks have rose 43.4% compared to a year ago. Without a cared-for employee, the base of Ford??™s operations would suffer. Implementing a new sales plan and restructuring has no worth without the ability to produce.
Consumers act as the second major stakeholder for Ford. If a consumer does not like or have confidence in the product being created then they simply will not buy. Ford??™s decision to refocus the core of their products to the profitable lines from Ford, Lincoln, Mercury and reemphasizing the brand toward the smaller and more economical vehicles (O??™Grady). Re-aligning to the core products and focusing efforts towards fewer total products for the consumer has resulted in a better product and a better reach to the various market segments.
In hopes that consumers would take notice and to better serve this major stakeholder, Ford began gearing up for their push into small car market early and while other domestic automakers were busy installing live television into trucks, Ford was working to beat their competitors in the area of efficiency standards (Ashe). This early attention to critical details positioned Ford in an optimal position amongst their failing domestic competitors. While other U.S. automakers plead for bailout and financial help, Ford was able to weather the storm and by understanding the needs of the consumer and meeting those needs immediately they quickly gained an outstanding public image and a happy buyer despite the restructuring that had occurred. This shows work in the interest of the consumer; as if Ford was watching for the pitfalls then they must have had the consumers in mind.
The consumer appeal resonates into the necessity for strong government regulatory alignment. Ensuring that Ford operates upon their guidelines seals the future success of the support of such agencies. In its attempt to understand the needs of the consumer and the agencies, Ford has released the very first manufactured electric vehicle. This came in the form of a transit van.
???While a delivery van may lack the sexiness of a Tesla Roadster or the mass-consumer appeal of a sedan like the upcoming Chevy Volt, fleet vehicles are actually an ideal place for Ford to begin the shift to an alternatively-fueled future. Fleet vehicles rack up a lot of daily miles, often along preset routes that are not too terribly far from the motor pool, making range less of an issue and enabling easy charging regimens. And while the up-front cost is higher — a possible deal-breaker for individual car buyers — the operating cost is significantly cheaper, making EVs ideal for large commercial clients that can really see the benefits of reduced costs associated with maintaining large fleets.??? (Dillow)
Such a vehicle speaks widely to the government agencies whose policies are working to reduce emissions. Replacing a large portion of vehicles in transit every day with more economical and efficient vehicle shows government stakeholders that Ford is both aware and interested in the issues that their agencies are producing.
In order to recover from the economic recession and position itself as a global leader in the auto industry Ford has implemented a bold and expansive restructuring project that aims to make them a leader in today??™s global market. Ford has strategically attended to each of its stakeholders and leaned the company by focusing on core product lines that bring Ford back to its roots.
In addition to restructuring Ford has also edged the competition with more fuel efficient, innovative products. They??™ve reached out to each of their stakeholders stating, ???Ford is reaching out and listening to customers, dealers, employees, the UAW, suppliers, investors, communities, retirees and federal, state and local governments, as all of these parties are crucial to our future business success.???
The steps taken by Ford to overcome adversity and emerge as a global leader in the auto industry show their commitment to their stated goals. To continue paving ???the way forward??? Ford needs a carefully crafted combination of market and nonmarket strategies that address the demands of its stakeholders. Here are a few recommendations designed to increase Fords ability to further deal with key issues that lie ahead.
The following sections contain the four parts of the plan or ???pillars??? as they were called in Ford??™s proposal to U.S. Congress. The plan is summarized as ???One Ford- One Team- One Plan- One Goal.??? It gives insight to the then current economic environment and also addresses specific questions they were asked by Speaker of the House Nancy Pelosi as well as other leaders.
Pillar 1: Aggressive Restructuring
Giving an indication of Ford??™s understanding of the global auto industry, their 25% decline of U.S. automotive market share since the 1990s, and the impending financial crisis that was soon to come, Ford began this restructuring process several years in advance as Chairman Bill Ford charged newly-appointed Ford Americas Division President Mark Fields with the duty of developing a plan to return the company back to profitability. The resulting plan, entitled ???The Way Forward,??? was released to the general public in January of 2006.
Following the release of ???The Way Forward???, Ford began to scale back so that the companies actions were more consistent with the realities of the current market environment. Their first major action was the sale of Aston Martin in March of 2007. Continuing with their goal to restructure the company and return to profitability, in March of 2008 Ford sold both Jaguar and Land Rover to India??™s Tata Motors and in November 2008 Ford reduced its nearly one-third controlling interest in Mazda down to around just thirteen percent.
The selling of entire lines were not the only actions Ford took to aggressively restructure the company. The Pillar 1 section goes on to explain how Ford had already reduced costs of salaried personnel by more than 40% over the past three years as well as a 10% cut effective February 2009 and the elimination of merit increases and bonuses due to be paid in 2009, $5.5 billion reduction in annualized operating expenses over the past three years, strengthened relationships with suppliers, and pledged to dedicate 50% of their U.S. manufacturing capacity to producing more fuel-efficient vehicles.
Pillar 2: New Product Development
Ford continues to be a leader in automotive innovation, especially in the area of small to mid-size vehicles. They proved successful by winning an impressive list of awards early in 2010 including Motor Trend??™s prestigious Car of the Year award. Ford has already began to scale back on its production of trucks and SUV??™s and has began making even more improvements to its other lines by focusing on ???fuel economy, innovation, quality, safety, and leading edge ???comfort and convenience??? technology. For example, by 2010 half of the Ford, Lincoln and Mercury light duty nameplates will qualify as ???Advanced Technology Vehicles??? under the Energy Independence and Security Act??“ increasing to 75 percent in 2011 and over 90 percent in 2014. In fact, Ford will achieve annual fuel savings of 2.5 billion gallons by 2012 model year.???
Ford is in no doubt responding to the fairly new yet large demand for fuel economy and technology. That was evident when reports showed that the Ford Focus was the number one domestic auto purchased through the ???cash for clunkers??? program but Ford also conceived an answer for those consumers who are not yet ready to sacrifice size and horsepower by designing a 300 horsepower engine that gets 30mpg for the new Ford Mustang. Ford was also recently ranked fifth place on Fast Company??™s Top 10 list of ???Most Innovative??? companies in mobile technology, becoming the first automaker to ever be recognized in this category which is shared by well known companies such as Google, Apple, and Amazon who had ranked first, second, and third place, respectively.
Pillar 3: Finance the Plan and Improve the Balance Sheet
The major moves of company restructuring prior to the credit crisis were a way for Ford to fix its own problems and operate self-sufficiently. As early as 2006 Ford began liquidating assets, issuing more stock, eliminating stock dividends, and taking pay cuts in high-paid salaried positions. As a result of Ford??™s effort to hunker down and get things done they reported a $2.7 billion net profit for 2009, a $17.5 billion improvement from a year ago, and year to date through February, Ford, Lincoln, and Mercury, together, already show a 34% increase in sales compared to a year ago.
Pillar 4: Working as a Team More Effectively
Ford is showing a continued committed to the entire Ford family. The following was taken from their new business plan:
???Ford is reaching out and listening to customers, dealers, employees, the UAW, suppliers, investors, communities, retirees and federal, state and local governments, as all of these parties are crucial to our future business success.???
???Openness, accountability, transparency and responsibility are driving factors??¦???
???High performance teamwork is a vital performance criterion that will be monitored weekly, monthly and quarterly to ensure continuous improvement.???
Stay true to your roots
Ford is known historically for the mastery of the production line and producing affordable, quality vehicles that appeal to the masses. One lesson that has emerged from the latest economic crisis is that a leaner, more focused Ford can better operate and meet the needs of consumers. The world market will respond to new, innovative, fuel efficient cars today as did Americans to the model T. This strategy may seem more of a market strategy but gaining public sentiment has been a tried and true social strategy as good today as in years past.
Stay the course
The new Ford is creating more fuel efficient vehicles that appeal to today??™s market. Electric cars and vans are the next step already in production. Ford needs to focus on innovation rather than a broadening is variety of brands.
Be a family
Ford can also increase stakeholder support as an information strategy by clearly stating its mission staying on course. One alternative that would appeal to employees is increasing their stake in the company. The Ford family is known for holding true to its own stake in the company. Pass the family sentiment to the employees by giving them a greater ownership in the company. This strategy can also help to keep wages down and give employees an incentive to catch the vision as a part a something bigger then
Work in sync with government
The statement was strongly made when Ford declined assistance from the government and instead self implemented its four pillar strategy designed to make them an industry leader. The goal is: Keep the governments hands out running business and redirect their attention to innovations in technology. One political strategy Ford can employ is lobbying the government to take a greater interest in the development of greener, more efficient vehicles. Government funding for innovation can free Ford from the expense of long-term research and development projects. This subsidy can assist in decreasing costs for Ford and create the right kind of government involvement is the auto industry.
2009 is first year to show profits since 2005
Ford??™s Four Pillar Plan
New Product Development
Financing and Improving the Balance Sheet
Working as a Team More Effectively
Converting SUV factory into small car plant.
Commitment to go green.
Sales are up for 2010.
The Way Forward
Sale of Mazda
Car of the year award http://www.motortrend.com/oftheyear/car/112_1001_2010_motor_trend_car_of_the_year_contenders_and_fin
Even the Mustang with its 300 horsepower gets more than 30mpg. Ford has invested $155million and has added 60 jobs at its Cleveland facility to build the new engine.
Ranked fifth place on Fast Company??™s Top 10 list for most innovative in mobile tech.
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Motor Trend. “2010 Motor Trend Car of the Year – Contenders and Finalists.” Motor Trend .com (2010): 1.
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