Business_Analysis

Ford Motor Corporation Business Analysis I Sharon B. Love MGT/521 Management July 30, 2012 Dr. Patrick E. Murray Certified Advanced Facilitator University of Phoenix Online Faculty Ford is one of the largest automotive manufacturers in the world. It manufactures and distributes automobiles across six continents. The company's automotive vehicle brands include Ford, Lincoln, Mercury and Volvo. The company primarily operates in the US and Europe. It is headquartered in Dearborn, Michigan, and employs about 164,000 people. FINANCIAL REVIEW Even though Chrysler, Ford and GM are no longer on their knees; sales are up and optimism is growing. According to Forbes, the following is an example of how their income statement, balance sheet and cash flow are in comparison.1 Income Statement FORD GM CHRYSLER Total Revenue 32,445M 150,280B 69,486* Gross Profit 19,110B 9,924* Operating Income 1,707M 5,670B Total Net Income 1,396M 9,190B 4,757* Balance Sheet Current Assets 336,335M 60, 25B 37,978* Total Assets 182,075M 144,60B 78,698* Current Liabilities 48,93B 32,536* Total Liabilities 165,469M 106,48B 63,624* Total Equity 16,606M 32,12B “ Liability/Shareholders 182,075M 144,60B Cash Flow Cash-Operating Act. 2,075M 8,170B Cash-Investing Act. (4,115M) 12,740B Cash-Financial Act 370M 258,00M Net change in cash 5,18B * Millions in Euro ($1-€.817) Armed with growing revenues and strong balance sheets, and to keep up with increasing vehicle demand, U.S. auto executives expect to boost domestic headcount and expand facilities in the coming year, according to a recent survey by KPMG LLP, the audit, tax, and advisory firm. 2 FORD’s Business Operations Ford’s business strategy is outlined in their ONE Ford plan. ONE Ford expands on the Company’s four-point business plan for achieving success globally. According to the top executives, the four-point business plan consists of the following:3 * Aggressively restructure to operate profitably at the current demand and changing model mix. * Accelerate development of new products our customers want and value. * Finance their plan and improve their balance sheet. * Work together effectively as one team. Building on this plan, ONE Ford encourages focus, teamwork and a single global approach, aligning employee efforts toward a common definition of success. It emphasizes the importance of working together as one team to achieve automotive leadership, which is measured by the satisfaction of our customers, employees and essential business partners, such as our dealers, investors, suppliers, unions/councils and the communities in which we operate. We have defined a set of behaviors that are expected of all employees to support the ONE Ford plan. The goal of ONE Ford is to create an exciting and viable company with profitable growth for all. The output of ONE Ford is: * Great Products, defined as those that are high quality, green, safe and smart. * Strong Business, based on a balanced portfolio of products and global presence; and * Better World, accomplished through our sustainability strategy. PRODUCT AND SEVICES According to Sustainability Report 2011/2012, Ford has brought about many changes and has created a new road to survival. “We have spent the last several years radically overhauling our production strategy from what was, in essence, that of a regional company to that of a fully globalized business. We simplified by making many drastic changes, but the results are paying dividends – both literally and figuratively.3 Through a difficult, multi-year process of workforce reductions and plant closures, we focused on minimizing overcapacity and reducing inefficiencies. The result today is a leaner and stronger Ford Motor Company. By staying laser focused on ONE Ford and on one global product strategy, we created a more flexible manufacturing operation that not only has saved us money, but has also resulted in faster product development and more efficient delivery of innovative new technologies in our core markets.” Ford is engaged in engineering, research and development (R&D) primarily to improve the performance (including fuel efficiency), safety, customer satisfaction, and to develop new products. The company’s One Ford global product development system utilizes global platforms to deliver customer-focused programs rapidly and efficiently across multiple markets. Through Ford’s hub and spoke approach, one lead product development engineering center, is assigned for each global vehicle line, thereby ensuring global scale and efficiency through common designs, parts, suppliers, and manufacturing processes. In FY2010, Ford introduced My Ford Touch and the next-generation of SYNC technology that would help in accessing and personalizing vehicle settings and functions using a mix of graphic, touch, and voice user interfaces. The company developed and introduced Curve Control technology that helps drivers maintain control of their vehicles when taking a curve swiftly according to FORD Motor Company SWOT Analysis, (June, 2011).4 Increasing operational performance Ford has recorded increase in its profits and margins over the last few years. The operating profit grew to $12,594 million in FY2010 from an operating loss of $5,975 million in FY2008. Similarly, the Company recorded net profit of $6,561 million in FY2010, as compared to a net loss of $14,766 million in FY2008. Further, the operating margin of the group increased from -4.2% in FY2008 to 9.8% in FY2010; and the net profit margin increased from -10.3% in FY2008 to 5.1% in FY2010. Increasing operating efficiency reflects the efficient cost management and sound decision making, which could be leveraged to fund growth plans in the future' As many Americans and others throughout the world struggle with making a comeback in lingering difficult economic conditions from the 2008 Great Recession, here are 5 lessons to learn from Ford Motor Company for dealing with and coming back from hard times according:5 1) Communicate with stakeholders. When Alan Mulally became Ford CEO the company was in trouble, bleeding cash with too few new, exciting products in the pipeline. But Mulally became a regular in front of Ford stakeholders, from suppliers, to dealers, debt holders and employees. In a crisis, leadership must be visible with all stakeholders so that they understand everything possible is being done to try and fix the problem. 2) Be simple and clear. Ford achieved the simple and clear mantra needed in tough times so that everyone understands the aim and goals through the "One Ford" vision. The company moved to simplify its platforms, and brand focus, shedding distracting brands like Volvo that didn't fit with Ford's Blue Oval namesake brand. But it was more than that -- in every communication Mulally made sure everybody was given one light to follow -- one Ford. It was a language and a focus all could understand. 3) Invest in the future. When times are tough, the tendency can be to cut back, slashing costs that strangle hopes for the future. Ford didn't have its hand out -- the company did not take TARP money -- and it didn't run for the hills -- Ford didn't file for bankruptcy. Instead, Ford doubled down on its future by pushing available cash into developing a product pipeline that could pull the company out of the downward spiral. It was a risk, but betting on the future while also dealing with pressing issues of the moment was the only way out. 4) Change. What worked in the past rarely works into the future. Ford made its mark in the 1990s with SUVS. But Mulally and company understood that the company had to evolve, and lead into the future with more efficient SUVS, and small cars that not only were efficient, but also exciting to drive. Times change, and so must people and companies if they want to lead instead of lag. Change is vital to sustainability, particularly for a company that's been in business for more than 100 years like Ford. 5) Reach out and touch someone. Ford understood that it could no longer try to simply tell customers and potential customers how good its products are -- the company needed to have meaningful conversations with customers so that they could learn for themselves what Ford and its products are about. So Ford used social media and other grass roots tools to develop relationships with customers beyond traditional advertisements and sales tools. By cultivating relationships through the innovative, direct approach, Ford was able to change how the company was viewed. It became very accessible, engaging with customers long before those customers reached dealer lots, and it changed the overall perception of the company so that when it brought new products to market, the market already had an understanding and knowledge. The U.S. auto industry is hiring again, and top executives expect to keep right on hiring through next year. “Essentially, the industry has a lot of new and upgraded factories; the U.S. has highly efficient, low-cost labor. They have done some clearly remarkable things,” said Gary Silberg, national automotive industry leader for KPMG LLP. Silberg said that according to the 2012 KPMG Automotive Industry Outlook survey of 100 “C-suite” senior executives, 72 percent said their companies would continue to hire more U.S. employees in 2013 – up from 62 percent for the same question in KPMG’s 2011 survey.2 CONCLUSION I would definitely recommend Ford Motor Corporation as an investment. Ford Motor Corporation is coming back strong in 2012. They have a strong business plan addressing customer service, operations, research and development and the future of the company. With the top three executives at the head of the table (William, Clay Ford, Jr, Executive Chairman; Alan Mulally, President, CEO and Robert Brown, VP, Sustainability, Environment and Safety Engineering), Ford is moving into future with a very good outlook. Ford has improved production and begins hiring more workers to assist in this increase in production. Ford was rescued by the government but they have done an excellent job posting increases in the last two years. They are contently improving technology in the cars and in the factories. For a company that was broken, they have improved tremendously with current technology. REFERENCE: 1. Henry, Jim, (July, 2012). Chrysler, Ford, GM Hang out the “Help Wanted”. Forbes Mag. 2. Silberg, Gary, (June, 2012), KPMG Automotive Industry Outlook Survey 3. Ford’s Sustainability Report, (2011/2012). 4. Ford Motor Company SWOT Analysis, (June, 2011), Data monitor. www.datamonitor.com. 5. Kiley, D. (2011, June). Big Three Score Card. Popular Mechanics, Vol 188(5).