ford motor company : 2009

5/19/2018 Ford Motor Company : 2009

1/41

FORD MOTOR COMPANY - 2009

PRESENTED BY : TEAM 6


2/41

HISTORY OF FORD


3/41

History of Ford

Founded by Henry Ford on June 16th,1903 Headquartered in Dearborn, Michigan

Worlds 5thlargest automaker

Largest family controlled company in the world

13.8% market share as of Feb 2009

Two service businesses Ford Motor CreditCompany & Genuine Parts & Motocraft


4/41

Service Businesses

f

Offers innovative Products and competitive financingrates with flexible terms

g

Know-how about parts, repairs & maintenance toowners of Ford, Lincoln & Mercury

k

-Electric Autolite Company 1961

-Makes parts for Mercury, Lincoln and Ford rangingfrom motor oils to transmission assemblies

-Due to lack of replacement vehicle parts by

manufacturers


5/41

Fords Divisions

Lincoln/Mercury (NA & Middle East)

-Lincoln MKZ ($34,190)

-Navigator ($61,480)

Volvo (safe vehicle)

Acquired in 1999Sold in 2010 to Geely Automobile

-Land Rover (2008)

-Jaguar (2008)

-Aston Martin (1987-2007) Prodrive

Mazda (33.4% share)


6/41

CASE BACKGROUND


7/41

Case Background

The Financial Crisis in 2008 engulfed the entire USautomobile industry

US auto sales almost halved down over the previous year

An unexpected fall in demand Ford - $14.7 billion loss for 2008

Government pitched in with prodigious amounts of cash

auto bailout

Ford - $5.9 billion, since it already had a debt of $33 billion

Sales continued to fall down in 2009, although not as bad as

other companies


8/41

Case Background (contd.)

Short term threat of insolvency Primarily because of the huge debts of Ford

Receded as economic conditions of the world improved

Focused on long term financial outlook

Cost reduction measures, Restructuring, Plant closures Switched to smaller, more fuel-efficient cars and the

sale of its loss-making Jaguar, Land Rover and AstonMartin subsidiaries

July 2009 2 % year over year sales gain; Financial troubles for Ford still persisted

Year 2011 Q2 - $2.3 billion followed by healthy sales


9/41

FINANCIAL ANALYSIS


10/41

FINANCIAL ANALYSIS

Overview

Market Cap of $ 10.16 Billion (Approx.)

Share Price from $14 in 2005 to $ 4 in 2009

Profitability and Growth

In 2009 Net loss of $ 14.57 Billion

Volvo Yearly loss of $ 1.5 Billion Europe and South America Increase in Revenue

North America 25 % Fall in Revenue


11/41

Liquidity and Solvency

Cash in Hand $ 15 Billion ( Current Burn Rate $7-8 Billion/Year )

GM and Chrysler fighting Bankruptcy Got $

17.4 from US Government

$ 9.9 Billion Debt Repurchase 500 Million

Annual Savings


12/41

PROBLEM IDENTIFICATION


13/41

Major Problems

Decline in sales

Loss of market share

Has 1 billion $ as goodwill 154 billion $ as long term debt


14/41

Other persistent problems

1) Many competitors in the market

a) Chryslar LLC

b) General Motors Corporation

c) Toyota Motor Corporationd) U.S Government

2) Global economic recession

3) Low consumer confidence

4) High unemployment

5) Unavailability of credit


15/41

COMPETITORS


16/41

COMPETITORS OF FORD

Main competitors of Ford in the U.S. marketare General Motors, Toyota and Chrysler.


17/41

TOYOTA

Reported annual revenues of $249.5 billion in 2008

Currently holds 16.9% of the U.S. market share

Highest Consumer Loyalty

Main strength Lower labour costs and greater

efficiency

40% decrease in revenues

Main focus all-new Prius and Lexius HS250h


18/41

GENERAL MOTORS

Holds an industry leading 18.8% of the U.S. market share But Sales down by 53% in 2009

Received a $18 billion bailout from the U.S. Government

Main focus a production ready fuel-cell vehicle by 2010

CHRYSLER

Holds a market share of 10.9 in the U.S.

Sales down by 44% in 2009

Received a $9 billion bailout from the U.S. Government

Main Focus Envi and smaller cars built by Nissan


19/41

CPM Matrix

CPM MATRIX FORD TOYOTA GM CHRYSLER

Critical Success

FactorsWeight Rating Score Rating Score Rating Score Rating Score

Technology 0.20 4 0.8 4 0.8 3 0.6 3 0.6

Brand image 0.20 4 0.8 3 0.6 4 0.8 3 0.6

Customer loyalty 0.10 3 0.3 4 0.4 3 0.3 3 0.3Price competition 0.15 3 0.45 4 0.6 3 0.45 2 0.3

Financial position 0.10 1 0.1 3 0.3 2 0.2 2 0.2

Management 0.05 3 0.15 3 0.15 3 0.15 3 0.15

Market share 0.10 2 0.2 3 0.3 4 0.4 2 0.2

Environment Friendly

Vehicles0.10 2 0.2 3 0.3 2 0.2 2 0.2

Total 1.00 3 3.5 3.1 2.6


20/41

PORTERS FIVE FORCES ANALYSIS


21/41

COMPETITOR RIVALRY (--)

1. Toyota, Honda and Nissan have grown rapidly

2. Better product offered at lower price (fuel efficient cars)3. Toyota is second in terms of US auto market share

4. Bailout not received by ford

5. GM & Chrysler has received and requested more

6. Intense internal rivalry

SUPPLIER POWER (--)

1. Since 2004 suppliers have reduced from 3300 to 1600

2. Suppliers viability

3. United Auto Workers Union - single greatest supplier of labor

supply in US

4. Structure change in healthcare benefits


22/41

BUYERS POWER (-)

1. Global economic recession

2. Increased unemployment rate

3. Low consumer demand for new autos4. Cash and Clunker's Program

5. Fleet sales - government, corporates and rental car companies

THREAT TO NEW ENTRY (0)1. Substantial fixed cost

2. Influence of brand names

3. Gaining access to markets (dealerships)

4. Entry - purchase of new company

5. Exit - mergers and acquisitions6. Ability to afford


23/41

THREAT OF SUBSTITUTION (+)

1. Rising fuel prices - public transportation2. No effect in near future


24/41

SWOT ANALYSIS


25/41

Strengths:

Timely acquisition of capital makes Ford more financially sound than the other

Big Three carmakers.

Product line is respected by industry experts and is qualitatively seen to be a step

above many of its competitors. Recent surveys place Ford in a tie with Toyota for

greatest customer satisfaction, a significant improvement from five years ago.

Has a global market presence, with worldwide brand recognition and a

particularly strong presence in Europe.

Is perceived to be a thoroughly American brand, which helps Ford among

certain groups of consumers.

U.S. market share, after years of decline, has stabilized in recent years.

The Ford F-series pickup remains the most respected commercial truck available;

despite demand shifts, profitability on this line should remain high.


26/41

Weaknesses:

Poor Profitability: Ford still loses money on many automobile lines, particularly

within the United States.

Importance of single components source (Visteon).

The automotive market is highly competitive with large fixed costs. In addition,

the market demands continual long term planning and research and

development.

Very little market penetration within China and India.

Global excess capacity for the automobile industry is estimated to average 30.5

million vehicles per year from 2009-2011.

Ford is selling a durable good during the most severe economic downturn in

recent history.


27/41

Opportunities:

Ford has recognized the importance of small, fuel efficient vehicles and is activelytransitioning into this market. Of particular interest is Fords EcoBoost

technology, which the company claims will result in 20% greater fuel efficiency

and 15% fewer CO2 emissions.

The OneFordvision has the chance to generate significant margin increases for

Fordssmaller line of vehicles. Of particular importance is the Ford Fiesta, which

was recently released in Europe and China and is slated for an early 2010 releasein North America. The One Ford vision appears to be a coherent strategy for

Ford to adopt given its changed role within the industry.

Ford is perceived to be the most stable American car manufacturer because it

has not been forced to take bailout money, leading to slight increases in market

share.

GM and Chrysler flexibility is limited by government involvement in their debt

situation, putting Ford as a competitive advantage.

In the event of a GM or Chrysler bankruptcy, Ford has placed itself in a position to

steal market shareat least in the short term.


28/41

Threats:

While not in need of a government bailout, poor financial results are straining Fords

capital. Cash burn continues unabated, and estimates indicate Ford may be forced to seek

government financing by early 2010 unless sales stabilize.

While Ford is readjusting production, truck sales are falling rapidly and Ford may not be

able to shift production quickly enough to meet changing demand.

Bankruptcy of Visteon or other parts supplier could cause severe disruption of supply

chain.

While Ford has too many dealers at this time, it should remain wary of too many closures.

In addition, because Ford Credit provides financing for most dealers it must be careful to

avoid holding the bag when dealerships close. It is possible that the OneFordstrategy could fail. While standardization across regions

provides significant cost savings, the success of such a strategy is predicated on consumer

tastes remaining consistent enough across geographical region.

Continued abatement in fuel prices could result in American preferences reverting back to

larger vehicles.

All indications so far are that the new Ford Fiesta will be a success in North America.

However, the failure of the Ford Fiesta in the American market would be disastrous for the

company. Ford has staked its future on the Fiesta, and while early reviews are positive,

North American acceptance is critical.

Weakness of the supply base: most Ford suppliers rely on contracts with GM and Chrysler.

A bankruptcy of one or both could decimate Fordssuppliers.

Current managed bankruptcy proposals for General Motors could allow GM to emerge

from bankruptcy in a significantly advantaged cost position.


29/41

GRAND STRATEGY MATRIX


30/41

GRAND STRATEGY MATRIX

FORD


31/41

MARKET PENETRATION:

Apply market strategy globally Sponsor events related to sports, entertainment etc.

TV ads

Developing Fords blog

PRODUCT DEVELOPMENT:

Production of fuel efficient cars

Production of hybrid energy vehicles

HORIZONTAL INTEGRATION:

Alliance with competitors


32/41

RECOMMENDATIONS


33/41

Recommendations

ResearchThe company should focus more on the designs of itsproducts and come up with more diverse and efficientmodels

InnovationFord should engineer the product innovatively to gainattraction of a large population

Price

The small cars concept can achieve its goals only if it ispriced properly as developing markets are highly pricesensitive


34/41

Divest Volvo

Sell off Volvo and try to make even for losses

China and India

It is time for Ford to steal market share in China

because of the economic incentives provided by

the Chinese government and GMs ongoing

difficulties. Whereas, Ford would need to make

a significant capital investment into the Indian

market if it wished to ramp up production whichcan wait till the Global Economy stabilizes

Supply Chain Management


35/41

WHAT FORD ACTUALLY DID


36/41

What Ford did


37/41

The One Ford Strategy

CEO, Alan Mulally

Implementing the strategy

Way Forward

Challenges


38/41

Results

Ford Fusion

Mid-size sedan 2010 model

August 2009, 5 month consecutive sales record

Competes with Toyota Camry, Honda Accord

Sales of 1.02 lakhs,1.84 laks,1.60 lakhs

respectively

Couldnt make in Top 10, but reported strong sales


39/41

Pickups and SUVs

F-150 pickup ,Ford Escape and Mercury Mariner

SUVs

Added shifts due to demand Michigan, Missouri

Back to 3 shift operationDearborn, Michigan,Kansas City, Missouri

Resulted in increased production

F-150 -10,000 units , Escape & Mariner-2,400units


40/41

Cash for Clunkers program

Growth in sales for 3rdand 4thquarters of 2009Started in July 2009 by US Government

Trade off for truck and cars with mileage of less

than 18 miles per gallon for $3.5k -$4.5k2 Ford models in Top 10 - Focus(4th),Escape(10th)

Boosted sales in North America from 4.9 lakhs Q3

to 5.7 lakhs 33% rise from previous year

2% year over year sales gain while other showed

decline First since November 2007


41/41

ford motor company : 2009

Documents