Past analysis on Ford explored financial statements; identified strengths, weaknesses, opportunities, and threats; explored trends within the global market; and benchmarked Ford against other automotive industry leaders. Building on these findings it is necessary to discover the influence that the local, national, and worldwide economy has on the business. Many fluctuations occur outside the company, which determine decisions made by Ford management, and the company must keep close watch on the effects these changes have on its people.
The following paragraphs will summarize past findings, outline economic trends and the influence they have on business decisions, explain Ford’s strategies to combat change with goals, and explore the role of human resources within Ford’s organization, and provide investment opinions centered on these discoveries. Past Analysis Overview As the automotive industry is still recovering from the blows it took in the downfall of the economy in 2008, it is critical that Ford focus on its tradition of being an innovative leader in the industry.
A SWOT analysis performed revealed that the strengths noted for Ford Motor Company are engineering capabilities, diversification, and market position. Ford has to push its global presence while continuing to advance in the areas of technology, safety, and consumer satisfaction. Weaknesses for Ford are product recalls and cash flow. Continuing to invest in technology, emerging markets, and focusing on safety controls will help to lessen the impact of these weaknesses. Ford’s opportunities lie in expansion of its Asian market, development of hybrid and electric vehicles, and investments.
The fact that many of Ford’s efforts seem to be hooked into the Asian market can be good and bad. Although China and other Asian countries are booming this investment will continue to reflect well on the company’s financial statements; however, the adverse is a possibility as well. On the other hand, because of Ford’s ability to reflect sound financials, the company has been able to secure Department of Energy loans to improve and expand the scope of several of their manufacturing plants. Price competition, supplier distress, and regulations over the industry continue to threaten Ford as well as other automobile manufacturers.
The company will need to diligently pursue technological advances, improve green build efforts, and focus on consumer satisfaction through product enhancements and safety. According to the recent article titled New Cars Industry Profile: North America (2011), “The performance of the market is forecast to accelerate for the five-year period of 2010-2015, which will drive the market value. ” Ford has a bright future with already possessing a good portion of the market segment and being able to obtain loans from the government to finance the revamping of several plants.
Ford is in better shape financially than competitors in the marketplace reflecting above average liquidity and increasing profit margin as well as a capacity to cover short-term debts. This speaks volumes for Ford’s ability to fund future investments without borrowing, thus avoiding interest and dividend charges for the borrowed funds. Continuing to improve technology and manufacturing through the use of electric and hybrid engines while consolidating engineering efforts in plants to accommodate more models with less downtime will pave the way to their future as a major stakeholder in the automotive industry.
Recent Economic Trends
Economic ups and downs play a considerable role in business. First it is necessary to look at the economy of the country. The recession and ultimate spiral of the banking and mortgage crisis in 2008 caused severe stress in the automotive industry. The major players in the market were struggling with little to no cash flow to carry them through along with an excess of inventory that was not moving. Because of the unknown future of the economy in the United States, many people had either found themselves unemployed and unable to buy or they were scared to spend any money because of the plummeting stock markets.
Both General Motors and Chrysler made the choice to ask the federal government to step in and help. “Ford said their company was sound, had financial reserves, didn’t need a government loan, and had significant plans to increase vehicle fuel efficiency and speed production of electric cars” (Graham, 2009). Going into bankruptcy and taking loans from the government allowed General Motors and Chrysler to keep their “big three” status in the automotive industry and stay in the game, but it did not help their public image as many Americans did not agree with the bailout or government involvement in business.
“By the time the public had a good look at the presidents of General Motors, Ford, and Chrysler, only one company came through with a positive image — Ford” (Graham, 2009). With the fall of the automotive industry came the fall of a city – the motor city. “The decline in the perception of the automotive business and the decline of Detroit are inextricably connected” (Cooper, 2011). Once a thriving city revolving around the automotive and steel manufacturing industries, this city sits barren and deserted by those that made it great.
“A city once emblematic of America’s industrial might will never return to its golden era of manufacturing” (Cooper, 2011). Just driving through Detroit or any of the suburbs it is evident that it has met its demise. Broken down, abandoned factories and manufacturing plants are around every corner. Crime has run ramped in the streets. People are unemployed and have nowhere to turn as the industries that their families worked in for decades have crumbled around them. “The people who won in Detroit left the city, and the people who were left behind are always the ones left behind” (Cooper, 2011).
The city of Detroit is left with a population that simply has nowhere to go and no way to get there. “Detroit lost 25 percent of its population over the last decade, reducing it to the size it was in 1910, just after Henry Ford began selling his first Model T” (Cooper, 2011). Due to outsourcing of the steel industry to other countries and the unknown future of the automotive industry, people found themselves without work and without hope. As a result the entire local economy took a downhill turn from which it has yet to recover.
“Detroit inhabitants fled a city of ravaged infrastructure and public services, bankrupt schools, abandoned buildings, and an industry that could no longer support them” (Cooper, 2011). Perhaps one of the largest impacts to the automotive industry is the global economy. Asia, and more specifically China, has seen the largest growth rate in the world over the last decade. In order for them to remain competitive in a global market, these companies have to branch out, find the best places to manufacture products based on cost, supply and demand ratios, and consider competitors outside of the United States as never before.
As a result it has been established that there are never any truly “American Made” automobiles any longer. While they may be assembled in plants in the United States, many of the parts are imported from Mexico or China where labor is less expensive. Strategies to Combat Change and Goals At the time General Motors and Chrysler were going to the government for a financial bailout, Ford had the financial means to withstand the recession and emerge with a plan to move forward in the global economy focusing on energy and manufacturing efficiency. “Ford stood out from the competition and gave consumers a reason to put a Ford in their future” (Graham, 2009).
Ford not only geared up to the global business expansion, but also sought to simplify and improve upon existing technology to continue to gain market share in the United States. “Instead of thinking outside-of-the-box, Ford chose in-the-box thinking and focused on how to capitalize on what was in front of them” (Graham, 2009). Ford has secured loans from the Department of Energy, which it is using to revamp its plants to be more efficient, more flexible, and avoid downtime. In doing so, the company has stood out from the domestic competitors as a financially sound company as General Motors and Chrysler were going through Chapter 11.
The Department of Energy only grants these loans to companies that can prove their financial stability, giving Ford an enormous financial advantage over its rivals. According to a recent article in USA Auto Reports (2010), “Eleven Ford facilities will be renovated using the Department of Energy funds. ” Ford is concentrating on key models and releasing its stock in Mazda and Jaguar. In fact, Ford has put a “One Ford” slogan in place that means it is focusing on one process and one brand identity.
“Ford cannot afford to waste so they are driving commonalities and global brand consistency, instead of focusing on multiple brands as the company had done in the past” (Egodigwe, 2009). Manufacturing plants are getting an overhaul to handle more models with less downtime between platform changes on the line. “To help achieve flexibility, Ford has reengineered material flow to reduce complexity on the line, including borrowing a ‘kit supply’ approach from Mazda” (Ludwig, 2010). Ford eliminates multiple workstations by providing consolidated parts directly to the manufacturing line and thus reducing movement of the workers.
In addition to remodeling several existing facilities Ford’s focus is on green technology gearing toward the addition of electric vehicles and improving fuel efficiency in all models of existing engines. Consumers are looking more and more toward fuel efficiency as the price of oil and gas continues to rise hitting them where it hurts the most, their wallets. Ford’s commitment to this type of technological advancement as well as its focus on quality and safety of their product will allow them to continue their competitive edge in the industry not only in the United States but also abroad.
“Ford knows what their customers want and they are prepared to deliver the right results” (Graham, 2009). Ford has seized the opportunity to branch into the emerging Asian Market as well as focus on the release of electric vehicles in Europe. “The company’s production strategy is now rooted in rationalizing the supply base across global platforms, with segments particularly important in Asia” (Ludwig, 2010). “Ford’s Asian expansion is being geared toward flexible manufacturing, where the same line produces multiple models or products without building in batches” (Ludwig, 2010).
“The company is in the process of rolling out its European order-to-delivery system, Vista, in the major markets of APA, including India, Australia, South Africa, and China” (Ludwig, 2010). The Vista system enables a switch from build-to-stock to build-to-order platforms allowing for customization for markets where needed. “Beyond the obvious growth forecasts in Asia, the company sees the APA region as a growing technological center, and one that will build and export parts and systems for a global market, and will depend on a strong group of suppliers and logistics providers” (Ludwig, 2010). The Human Resources Role
Ford has involved Human Resources heavily in its practices long before the economic crisis and reform of 2008. “In 2000, Ford embarked upon an approach to diversity and inclusion, which put the company on the leading edge of HR practice” (Ball, 2006). Ford recognizes that with the global economy comes a varying demand for product and the company is committed to meeting that demand. “Ford HR is doing a lot of restructuring to meet changing customer demand” (Egodigwe, 2009). In order to meet the ever-changing customer, Ford has to have the capacity to train, promote, and encourage employees to grow and stay with the organization.
“Ford HR is retaining and leveraging talent to deliver the company’s plan, so they have to make sure they have the right people in the right jobs” (Egodigwe, 2009). Allowing their Human Resources segment to put strategies in place for training and furthering the careers of existing employees to match the global needs of the company will result in employee loyalty and satisfaction. “Ford HR is very centered on having people who have “working together” behaviors through team development, positive attitudes, resourcefulness, emotional resilience, great communication, courage, and initiative” (Egodigwe, 2009).
As the company continues to grow and expand operations globally, more room for internal promotions will be available. “Ford ensures that employees are offered opportunities for continued development, mentoring, and participation in resource groups” (Egodigwe, 2009). Human Resources management at Ford initiates improvement platforms and plans across all manufacturing plants with the same incentive and review plan. “Plant managers have six priorities that they are graded on for safety, quality, delivery, costs, morale and environment” (Ball, 2006). The managers build action plans for upcoming months based on the evaluation in these areas.
Everyone in the plant is held accountable and rewarded for the grades received and the plants compete to be on top of their game in these categories. Conclusion Ford Motor Company has emerged from a recession in the United States economy and what appeared to be the downfall of the automotive industry with a plan encompassing global strategies to include green technology, emerging markets, streamlined manufacturing, and fuel efficiency. Ford has down-scaled its array of products to focus on the Ford brand and push that brand out globally focusing on the customer’s preferences and improving safety.
The only major United States-based automobile manufacturer not to take the government bailout, Ford has secured Department of Energy loans to focus on improving their manufacturing capabilities both in the United States and abroad. Existing manufacturing plants are being overhauled to accommodate more streamlined manufacturing with less downtime to change platforms, while new plants are being built in emerging markets such as Asia. Many economists believe that Asia is set to take over the world in technology. China alone carries the majority of the world’s population.
Ford has recognized that investing in Asia is essential for long-term growth and a must in order to stay competitive in the global market. Continuing to advance technologies for electric vehicles and fuel efficiency will keep Ford on the cutting edge of the industry and secure its role as a big player. Because of the focus on the global economy rather than just that of the United States, investors have the ability to diversify their investments in a multitude of markets through Ford. As long as their balance sheet continues to show favorable results the company will prove to be a good option for potential investors.
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