Category : Articles
Business Analysis Part II: Ford Motor Company
Ford Motor Company is on the path of financial recovery. This is verified by studying Ford??™s financial statements; those statements are then compared and contrast against other industry competitors. The company??™s revenues show a steady increase in the last three years, while still growing its liquidity cash flow during that time same time period. Consequently, these three indicators show Ford??™s current financial health which shows a strong financial stability compared to the onset of the 2008 recession.
Ford Motors & Competitors Comparison
Ford??™s revenue in 2011 was 136,264 billion dollars with 22.9 billion as profit, however after the subtraction of automotive debt the net profit is reduced to 9.8 billion dollars (Ford Motor Annual Report, 2011). In comparison, General Motor??™s revenue was slightly higher for 2011 with 150,276 billion but only reported 9,190 billion in profits after automotive debt is subtracted (GM Annual Report, 2011). Chrysler Group??™s revenue for 2011 was 55 billion and profits of 183,000 million (Chrysler Annual Report, 2011). The data shows GM as the top revenue producer in 2011; however Ford clearly produced stronger overall profits when compared to their respective counterparts within the industry. Ford also had the strongest cash flow of the three with 17.148 million; a year prior Ford??™s cash was 14.805 million, up 2.35 million from 2010 (Google NYSE:F, 2011).
Companies in Review
After carefully contemplation of Ford??™s financial numbers it is plausible to conceive that Ford Motors is on their way up preverbal ladder in the essential categories that define good financial health. Their balance sheet illustrates that sales are rising while operational costs being held under controlled. These operational costs have continued to decrease as Ford Motors strives to restructure their operational cost to increase their profit margins while affording dividends to Ford??™s shareholders. Jimmy Settles unions chief negotiator with Ford from the United Auto Workers union , said “To ensure that both sides benefit, the UAW and Ford negotiated a contract that helps the company keep their fixed costs and product prices competitive, while providing substantially increased profit-sharing to workers, so everyone benefits when the company does well,” (Isidore, 2011). Although General Motors created better revenue production, the company earned less than half the profits. GM has also lost their ???mojo??™ when it comes to being the leader in automotive industry; due to their lack of fuel efficient vehicles outside of the Chevy Volt. While the Volt is great starting foundation for the future it will have to be followed by equal innovation and cannot be cost prohibitive as consumers currently see the Volt as. Chrysler, which had been heavily reliant on sales to corporate and rental fleets in the recent past, reported an upswing in its non-fleet retail sales of 27% (Valdes-Dapena, P. 2011). Even though Chrysler earned the lease amount of profit and overall sales; the company as a whole seems to be rebounding as well. Ford Motors manages costs in various ways which include inventory levels (fleet and parts), modernizing distribution centers and debt management. In addition, Ford has increased their ???cash flow??™ over the last few years; this is also good indication of the company rebounding well in their comeback attempt. A solid cash flow affords Ford Motors to make the crucial modernizations to their infrastructure and distribution networks and creates opportunities to re-launch the brand in the European markets.
Upon the meticulous examination of Ford??™s financial statements there seems to be a concern that Ford??™s liabilities are higher than their net assets which could indicated a problem in the future. However, Ford Motors has continued to rebound well; looking at the company??™s upward growth in terms of revenue, profits and positive cash flow. Nevertheless, their debt obligation did rise marginally (41,421 billion), up from (40, 247) in 2010 (Ford Motor Annual Report, 2011). This slight increase could have be the result of Ford??™s decision to invest in their infrastructure throughout many U.S. manufacturing plants. Subsequently, the debt increase should balance out by rising profits as the company looks to return to pre-recession sale levels. By the end of 2011, Ford Motors owed $99.48 billion and it has cash of $17.15 billion. This means that within 3 years, the companys debt was reduced by more than $50 billion while the company was able to save cash as a cushion. At this rate, Fords debt should be very manageable and fall below $50 billion by 2016 (Seeking Alpha, 2012).
Management Moving Forward
Ford Motor??™s financial statements afford upper and mid-level management the opportunity to continue to develop the Ford brand worldwide. Turning the company??™s financial burned into a strong financial footing gives Ford Motors the substantial cash flow that management needs. Furthermore, aggressive marketing would allow Ford Motors to invest more in upgrading or adding new production and distribution facilities. Thus in order for Ford Motor??™s to have continued success in maintaining a positive revenue stream, management needs to drive sales throughout all dealerships worldwide; which will be key in preserving the increasing trend in profits.
Ford Motors Financial Health
Ford Motors is a kingpin within the automotive industry; this is due to a strong revenue performance in sales and overall profits since 2008. Ford??™s performance is a direct result from their accomplishment in streamlining of its manufacturing operations by creating vehicles that is in highly sought-after by consumers. Furthermore, with U.S. gasoline prices threating the American way of life; fuel efficient vehicles with modern day technological advances are most attractive to consumers today.
Moreover, while Ford Motor??™s has implemented these innovative advances they did not have to sacrifice their trademark designs in the process; creating audacious styles and futuristic models that appeal to consumers at home and abroad. To achieve this ambitious stature; Ford Motors needed to be the leader of automotive technology and ahead of its competition. Subsequently, Ford Motor??™s surpassed their direct competition with their proprietary Sync technology system which is now their signature technological advancement as consumers rave about this practical ingenuity, which in laymen terms, links customers tech devices (such as phones, tablets and MP3 players) to the vehicle entertainment system. In addition, Ford Motors engine overall has also benefited from a shot of inventiveness; the new eco-boost engine available in almost all models including SUV??™s that were environmentally unfriendly just a few years ago. The focal point of an eco-boost engine is the increase in gas mileage while maintain the vehicles overall performance and horsepower.
In comparison, General Motors has also created technological advancements to level the competition playfield. MyLink is GM answered to Ford??™s SYNC Technology; MyLink links to smartphone and grants the end user direct access to apps through the steering wheel controls, touchscreen or voice commands powered by Nuances voice recognition technology. Through the use of tethering any smartphone/other tech devices with the assist of Bluetooth, the end user can talk without holding their phone, download music and carry out a variety of other tasks without having to fidget with these distracting gadgets (Lavrinc, D. 2011). Another example, of General Motors advancing to the future is through their On Star technology that offers these added driving features (with paid subscription), such as but not limited to; vehicle security, hands free calling, turn-by-turn navigation, and remote diagnostics systems throughout the United States, Canada and China. In September 2011 the president of OnStar stated that their service packages were six million customers strong (On Star Reverses Decision, 2011).
The last of the big three, Chrysler Group LLC is behind the curveball and turning to new ownership Fiat for assistance. In the past five years Chrysler??™s future have come with a financial uncertainty has crippled their ability to invest in latest technological advancements like their U.S. based counterparts Ford Motors and General Motors have done successfully. However, through Fiat, Chrysler is implementing technologies that may end in a complete overhaul of future product sales in comparison to their assortment of large, horsepower based of cars and trucks for which have been the company??™s staple throughout their existence. Chrysler plans to use the smaller and technologically constructed engines all built with lighter chassis, and thrown in turbocharging and efficiency boosting engines it is no wonder Chrysler is still going to be in the game for many years to come. Some of the advance technology that shows off Chrysler??™s fuel economy dedication include an eight-speed transmission allocated for the 2012 Chrysler 300 and Dodge Charger this transmission will give these full size sedans??™ V6 engines to average more than 30 highway miles per gallon. Furthermore, top company brass are considering implementing natural-gas in to their line-up; fueled internal combustion engines to bring CNG (compressed natural gas) this cleaner burning fuel to the U.S. market which is something Fiat has the expertise in. Although they do not show a significant amount of improvement on their fuel economy, CNG automobiles run only on natural gas therefore they do not use any oil based gasoline and deliver about 25 percent to 30 percent less greenhouse gas emissions than standard oil burning cars and trucks (King, 2011).
Companies Globalization Business Strategies
Globalization is crucial for all car manufactures within the automotive industry. Consequently, seventy percent of Ford Motors sales are from foreign markets; therefore it is essential for Ford to grow these international markets through the introduction of their latest products and innovated technology. Subsequently, Ford Motors has initiated a one billion dollar investment in the country of India and through a joint business venture with Sollers OJSC in Russia. In addition, Ford is advancing their stakes by investing into new manufacturing plants in China and South America respectfully. In early 2012 Ford introduce a new global product, Eco Sport, with its Eco-Boost engine. Generally SUVs are not associated with high mileage but Ecosport would be an exception. With the technological advanced ???split cooling??? method decreases petroleum consumption by heating up the engine faster. This is possible because the engine is made out of cast iron instead of the standard aluminum based engines. Furthermore, this clean and green engine emits less than 140g/km CO2 (Cardekho, 2012). Ford has a strong plan to increase its global presence and predicts an increase by 15 percent in sales outside of the US by 2020 (Ford Motor Annual Report, 2011).
Ford Motors Benchmarking
Ford Motors is a pioneer when it comes to benchmarking; Competitive Benchmarking or Performance Benchmarking is what Ford Motors hangs their hat on. The best way to define benchmarking is this ???the practice of being humble enough to admit that someone else is better at something and being wise enough to succeed in matching and even surpassing the competition.??? Accordingly, Ford Motors selects the essential attributes and characteristics of its competitor??™s products to guide its teardown crews as they inspect proprietary systems and start the disassembling process. In addition, tearing down competitors??™ products for the sole purpose of studying them is another form of competitive research. Teardown crews will also study the competitor??™s maintenance manuals, and test every moving component during the team inspection. Ford utilizes these teardown crews to collect the data from their competitor??™s vehicles that best describes the architectural directions and removes their design concepts and utilize them in their current and future vehicular models. This practice is used throughout the automotive industry by all car manufactures (Benchmarking & Competitive Intelligence, 2012).
In conclusion, Ford Motors is a well renowned leader throughout the automotive industry and by far overshadows its competitors. Henceforth, the loftier earnings Ford has generated in contrast with General Motors and Chrysler Group LLC., demonstrates that Ford??™s vehicle selections are more desirable to the modern-day technical consumers. Ford Motors has benefited from their acclaimed success in the creation of fuel efficient vehicles while preserving trendy styles and overall value. Although Ford Motors did not partake in government bailout money; they did get a loan in mid-2009 to revamp the hybrid models and they have been on top of those loans, repaying the government which has reduced their debt quicker than their competitors. Furthermore, their financial sheet indicates they are burdening less debt than General Motors and Chrysler Group LLC. Today Ford is striving to claim the number one spot for U.S. automakers by increasing their global presence, embarking on latest technology and staying neck-in-neck with total vehicle sales with GM. Going forward, Ford Motors is in the game, and they are in it to win it and they are determined to stake their claim as the top U.S. automotive manufacture.
Benchmarking and Competitive Intelligence (2012) Retrieved on November 9, 2012 from http://www.icgpartners.com/services/Benchmarking_and_Competitive_Intelligence.asp
Cardekho, (2012) Ford Ecosport Retrieved on November 9, 2012 from http://www.cardekho.com/carmodels/Ford/Ford_Ecosport
Chrysler Group Reports Full Year 2011 Net Income of $183 Million Retrieved on November 9, 2012http://www.chryslergroupllc.com/Investor/PressReleases/financial/ChryslerDocuments/Q4_%202011_PressRelease.pdf
Ford Motor Company / 2011 Annual Report Retrieved on November 10, 2012 http://corporate.ford.com/doc/2011_annual_report.pdf
General Motors Company /2011 Annual Report Retrieved on November 11, 2012 http://www.gm.com/content/dam/gmcom/COMPANY/Investors/Stockholder_Information/PDFs/2011_GM_Annual_Report.pdf
Google Ford Motor Company ??“ NYSE:F Retrieved on November 8, 2012 http://www.google.com/financefstype=ii&q=NYSE:F
Homles, J. (2012), Ford Reports 2011 in Profits of 8.8 Billion, Net Income of 20.2 Billion Retrieved on November 9, 2012 http://rumors.automobilemag.com/ford-reports-2011-profits-of-8-8-billion-net-income-of-20-2-billion-104971.html
Isidore, C. (2011) CNN Money, Ford-UAW deal may add nearly 6,000 new jobs Retrieved on November 10, 2012 http://money.cnn.com/2011/10/04/news/companies/ford_uaw_deal/index.htm
King, D. (2011) Chrysler Turns To Fiat To Meet Mileage Standards Retrieved on November 8, 2012 http://www.autoobserver.com/2011/09/chrysler-turns-to-fiat-to-meet-mileage-standards.html
Lavrinc, D. (2011) Translogic, Introducing Chevrolet MyLink, GMs Sync competitor Retrieved on November 10, 2012 http://translogic.aolautos.com/2011/02/17/chevrolet-mylink/
OnStar Reverses Decision to Change Terms and Conditions, 2011 Retrieved on November 10, 2012http://media.gm.com/content/media/us/en/gm/news.detail.html/content/Pages/news/us/en/2011/Sep/0927_onstar.html
Seeking Alpha, (2012) Patient Investors Of Ford Will Be Rewarded As The Company Shrinks Its Debt Retrieved on November 9, 2012 http://seekingalpha.com/article/579411-patient-investors-of-ford-will-be-rewarded-as-the-company-shrinks-its-debt
Valdes-Dapena, P. (2011) Chrysler, Hyundai sales buck industry slump Retrieved on November 9, 2012 http://money.cnn.com/2011/06/01/autos/may_2011_auto_sales/index.htm