Student

Ford Motor Company Abstract There comes a time for every business, no matter how big or small, when they run out of room to grow. It is a very uncertain time when they must step out of their comfort zone and out into the unknown where competition is fierce. In my research I intend to go behind the scenes through a period of reconstruction of a proud automaker with rich history, Ford Motor Company. I plan on taking a look at Ford’s decline in sales, the new decision-making strategies they came up with to cope with this time, their current overall stage, and lastly take a look at how they plan to attack the future of the automotive industry by learning from their mistakes. Also, I will use examples from Michael Porter’s model to evaluate how Ford maintained its competitive advantage through a time of reinvention. To wrap it all up, I will give my personal opinion on this company based on the facts presented in the research paper. Table of Contents I. The decline of Ford Motors A) Ford accepts it decline B) Evaluating Ford’s financial losses C) Downsizing its North American operations II. Ford Motor’s Plan for Recovery A) Hiring new CEO B) The way forward C) Ford chooses private solution for regaining its corporate health D) Culture change led to success III. Ford’s current stage A) Ford Motor cuts debt B) Ford at the top of consumer’s best liked auto brands C) Evolving technology IV. Conclusion A) Learning from mistakes B) Future goals C) Recommendations Ford Motor Company Since the company's founding in 1903, the name Ford has been synonymous with the automotive industry. Company founder Henry Ford Sr. became known for innovation and transforming his company into an American icon. Ford is headquartered in Dearborn, Michigan specializing in the manufacture of passenger cars, trucks, and tractors as well as automotive parts and accessories. Currently, Ford is the second largest automaker in the US and the fourth largest in the world. Now that we have familiarized ourselves a bit more with the Ford Motor Company, let’s take a look at the crisis they had to recuperate from starting in the year 2006. On Monday October 23, 2006 Ford announced that its net loss had grown to $5.8 billion in the third quarter, marking its worst quarterly performance in 14 years as its North American business kept hurting them financially due to the restructuring period. This was a result of many problems Ford encountered at the time such as the burden of union pensions, a lingering quality gap with the Japanese automakers, and the strength of Toyota and Honda in the U.S. market. Sales of some of its most profitable vehicles, like the recently redesigned Explorer and Expedition SUVs, had fallen. Despite a redesign that improved the vehicle's ride and handling, sales of the Explorer have tumbled about 31 percent in 2006. Evaluating Ford’s financial losses in the year 2006, one can assume that Restructuring is going to get intense and expensive. Things could get worse before getting better for sure. During this period, Ford seemed to have adopted a strategy of “managed decline” by cutting models, closing plants, and trying to find a new niche that it can occupy. By September of that year, Ford announced a plan to drastically downsize its North American operations by cutting about a third of its salaried employees. In total Ford expects to eliminate about 44,000 hourly and salaried employees in North America. The move was a desperate move to speed up the company’s “Way Forward” plan announced in January of 2006 which aims at cutting annual operating costs by $5 billion. The cuts devastated communities across the country, particularly those in Michigan, where Ford headquarters are located. At the time Michigan already has the highest jobless rate, 7.1 percent, of any state in the country. This news came ten days after the announcement that Bill Ford, great-grandson of Henry Ford, who had run the automaker for five years, was being replaced as the CEO by former Boeing executive Alan Mulally. There is a famous quote by the late preacher Charles Swindoll that expresses how “Life is 10% what happens to you and 90% how you react to it.” This takes us to the first of four steps Ford Motors took to recover from the financial chaos caused by this automotive crisis. The first came as a surprise to many when Bill Ford, who stayed on as a chairman, announced Alan Mulally as his successor to the Ford Motor Company. In a televised press conference Bill Ford told reporters that he picked Mulally for his experience in turning around Boeing after the company's difficulties following September 11. Mr. Mulally served as the Chief Executive Officer and President of Boeing Commercial Airplanes Group from August 2002 to September 5, 2006. He was responsible for all airplane development activities, flight test operations, certification and government technical liaison and also was responsible for all of the Boeing commercial airplane programs and related ... services, which in 2005 generated record orders for new business and sales of more than $22.6 billion. I think this step to bring in new management from outside the company is a smart move because Ford needed a fresh outlook on things and could benefit from leadership of someone who had been through tough times successfully. The next step of action came from Mark Fields, Ford’s president of the Americas. With Ford's market share in the U.S. sloping away, Mr. Fields proposed Ford Motor Company’s plan for recovery through his much anticipated the "Way Forward" plan. Fields said Ford plans to close 14 plants and reduce its workforce by 30,000 over the next six years. The closures are designed to raise Ford's North American plant utilization to 100 percent by cutting capacity by 1.2 million units, or 26 percent, by 2008. It also included the desired goal of achieving $6 billion in material cost savings by 2010, in its bid to get back in the black which they did accomplish. Bill Ford added that Ford will be making painful sacrifices to protect Ford s heritage and secure the future,. Going forward, we will be able to deliver more innovative products, better returns for our shareholders and stability in the communities where we operate explained Bill Ford on January 23, 2006. Thirdly, in 2008 Ford Motor Company steered clear of the auto industry's version of the "public option," a government-funded bankruptcy. Ford chose a private solution for regaining its corporate health, and today the patient is walking without a government crutch unlike Toyota and GM. As a result the company gained a percentage of market share in the first 10 months of 2009, no easy feat in an ultra-competitive market and has continued to flourish. The company's turnaround actually began when the new appointed CEO, Alan Mulally decided to go with zagging every time that General Motors zigged, which was remarkable for a company whose strategy for decades was to follow GM. When General Motors kept its CEO, the late Rick Wagoner, Ford brought in a new one, Alan Mulally from Boeing. While GM kept its unwieldy assortment of eight brands, Ford sold Jaguar and Land Rover, cutting its brand lineup down to a manageable size. pattern continued when General Motors bet big on home mortgages through GMAC and then sold control of the financing unit, which now is on government welfare, just like General Motors itself. Ford avoided home mortgages and held onto its finance arm, Ford Motor Credit, choosing instead to mortgage all its assets to raise money to fund its turnaround effort. Ford's self-help strategy carries a cost: The company now has much more debt than GM, about $27 billion to $17 billion, because the General had some three-fourths of its borrowings washed away in bankruptcy court. But controlling its source of dealer and consumer financing is a huge advantage for Ford, and the company is shoring up its balance sheet by swapping some of that debt for new equity.