Ford Strategic Audit

Ford Motor Company (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. The company recorded revenues of $128,954 million during the fiscal year ended December 2010 (FY2010), an increase of 10. 9% over FY2009. The operating profit of the company was $7,149 million during FY2010, as compared to an operating profit of $2,599 million in FY2009.

The net profit was $6,561 million in FY2010, as compared to a net profit of $2,717 million in FY2009. Introduction Ford Motor Company (Ford) is a producer of cars and trucks. The Company and its subsidiaries also engage in other businesses, including financing vehicles. The Company operates in two sectors: Automotive and Financial Services. Its Automotive Sector includes Ford North America, Ford South America, Ford Europe and Ford Asia Pacific Africa. Financial Services includes Ford Motor Credit Company and Other Financial Services.

Ford North America includes the sale of Ford- and Lincoln-brand vehicles and related service parts in North America (the United States, Canada and Mexico), together with the associated costs to develop, manufacture, distribute and service these vehicles and parts. Ford Motor Credit Company includes vehicle-related financing, leasing, and insurance. Other Financial Services Includes a variety of businesses including holding companies and real estate. SIC Code Information:| 3711 – Motor Vehicles And Car Bodies 3714 – Motor Vehicle Parts And Accessories 3211 – Flat Glass

3537 – Industrial Trucks And Tractors 3713 – Truck And Bus Bodies 6159 – Misc. Business Credit Institutions 5012 – Automobiles And Other Motor Vehicles 5013 – Motor Vehicle Supplies & New Parts 7514 – Passenger Car Rental 7513 – Truck Rental And Leasing 7515 – Passenger Car Leasing 7538 – General Automotive Repair Shops| NAICS Code Information:| 336111 – Automobile Manufacturing 327211 – Flat Glass Manufacturing 333924 – Industrial Truck, Tractor, Trailer, and Stacker Machinery Manufacturing 336211 – Motor Vehicle Body Manufacturing 336399 – All Other Motor Vehicle Parts Manufacturing

423110 – Automobile and Other Motor Vehicle Merchant Wholesalers 423120 – Motor Vehicle Supplies and New Parts Merchant Wholesalers 522298 – All Other Non-Depository Credit Intermediation 532111 – Passenger Cars Rental 532112 – Passenger Cars Leasing 532120 – Truck, Utility Trailer and RV (Recreational Vehicle) Rental and Leasing 811111 – General Automotive Repair| Stock Symbol: F Current Stock Price as of March 19, 2012: $12:51 History For more then 100 years, Ford Motor Company is one of the greatest automobile manufacturers of all time. They started under Henry Ford in Detroit, Michigan.

Ford’s first production was in 1903, the Model A, with an under the floor engine selling for $850. In the first season it sold 1,708 cars. Since Henry Ford started ford motors it has continuously remained under family ownership since this time. The company developed and implemented assembly line production by the release of the Model T in 1909. The Model T, or Tin Lizzie, became extremely popular for the next 18 years due to its price of $850, fuel consumption, engine size, and speed in the 40-mph range. More than 15 million cars were made under Ford between 1908 and 1927. It became the all-American automobile.

Production increased rapidly over the years while recalling their first million-car year in 1922. As Ford continued to produce they expanded into Great Britain, France, and Germany. Ford became a strong automobile company but needed change as they realized their only color was black. In 1927 the Model T left the market only leading to new and highly innovative automobiles to be created. The Model A became the next popular car but caused a three-month changeover period while production occurred. The price of the Model A was $450, while 4. 5 million were sold in the next four years.

The car was also sold in a station wagon offering a change in style and shape. In 1932 a V8 3. 6 liter automobile was mass-produced for $460 creating a great demand for Ford automobiles. Many cars were introduced over the years featuring new styles. The Model A and B were both sold with larger engines and greater amounts of horsepower. Also hydraulic brakes, column changes, and suspensions were introduced to better the company’s profits. After World War II, production slowed down until the entrance of the 1949 line. At this time power units were new along with the automatic transmission in 1950.

Great automobiles were manufactured in the coming years. The sporty Ford Thunderbird was introduced with 5. 1 liters and capabilities of 113 mph. In 1958 it became a convertible with five seats and a strengthened structure. Major restyling occurred in the late 1950’s with such automobiles as the Falcon, a compact car, with the help of General Motors and Chrysler. During the 1960’s competition increased and Ford had to become innovative in order to remain one of the top manufacturers. They put their minds together to create the Ford Mustang in 1964, a compact semi GT with four seats, at a price of $2480.

The automobile had a 4. 7 litre V8 engine with speeds exceeding 110 mph. The car was a great success and remained so until the present day selling over 500,000 in the first year and a half on the market. During the coming years Ford realized it’s potential. They have created some great cars including the Thunderbird, Model T, Fairlaine, Galaxie, Falcon, and Mustang. They have also increased their production well into the 1980’s and further with the offerings of four wheel drive pickup trucks and all terrain vehicles such as the Bronco, Jeep, F series, and Ranger.

They became increasingly aware of needs for change such as colors, convertibles, hardtops, and number of doors. With increased production, innovative styles, low prices, and customer satisfaction Ford Motor Company has become a worldwide leader in the manufacturing of automobiles. Current Organizational Challenge Corporate Strategy The most important challenge is to continue to maintain a profit on an annual basis, while keeping the customers needs first. Strategy Formulation Mission and Vision ONE FORD MISSION: ONE TEAM

People working together as a lean, global enterprise for automotive leadership, as measured by: · Customer, Employee, Dealer, Investor, Supplier, Union/Council, and Community Satisfaction ONE PLAN · Aggressively restructure to operate profitably at the current demand and changing model mix · Accelerate development of new products our customers want and value · Finance our plan and improve our balance sheet · Work together effectively as one team ONE GOAL An exciting viable Ford delivering profitable growth for all. Current Situation

Ford has the number one selling pick-up truck on the market, they current are showing profits. External Analysis Opportunities Since the terrorist attacks on Sept. 11, patriotism has surged through the United States. Many consumers will seek American products, benefiting companies such as Ford. In an effort to stimulate buyers to combat decreasing sales, Ford implemented a zero percent financing plan through Oct. 2001 with their “Ford Drives America” campaign. Investors will be encouraged by this plan’s opportunity to increase profits and revenue, leading to greater investor trust in the company.

The attacks also gave Ford the chance to show their commitment to America by donating millions of dollars towards relief efforts. In addition, both investors and customers will have more confidence in the company because of the new CEO William Clay Ford. For the company’s publics, a new face in higher management could mean changes within the company on all levels. Bill Ford has plans to invest more time in improving and restructuring relationships inside and out of the company. His leadership provides the company with an opportunity to implement new ideas, leading to increased stability and confidence within the company.

Threats With the knowledge of the safety issues surrounding Firestone tires on Ford Explorers, consumers have been scared to purchase Ford vehicles. Customers have become critical of Ford’s aging products and instead are buying cars and trucks made by foreign competitors, as well as those of General Motors. The recession and the war discourage people from investing in the luxury of new cars, thus Ford’s appeal has lessened significantly, threatening the entire company. (Appendix: “What’s Behind Ford’s Fall” Fortune). Current layoffs due to lower production levels will continue to raise concerns among

employees about their job security. Layoffs are also eminent because of the loss of revenue due to Firestone tire recalls and recalls on millions of other vehicles, lawsuits surrounding the cases, and the recession. Like most companies facing a challenging market, Ford will have a tough time pleasing investors. Also, Ford’s publics currently question the overall reputation of the company, especially concerning safety issues, which can devalue Ford stock. The increase of global market presence from other automobile companies will cause Ford to lose market share in the automobile industry.

The Competition The automobile industry is largely competitive due to the demand of consumers and vehicle similarity. In the automotive industry a certain vehicle brand or company must be distinct and unique with similar features available in each vehicle. One company that incorporates design, creativity, and innovation into its product is Ford Motor Company. Ford Motor Company has achieved the goal of making its automobiles unique because of its heavy, strong trucks, efficient gas saving sedans, and unique structure and appearance.

Due to constant brainstorming sessions on designs and creativity, Ford Motor Company has developed some of the top rated vehicles in the United States. Moreover, it will continue to strive to meet the needs of consumers with fresh designs, products, new ideas, and features to its automobiles. Ford Motor Company is the second largest producer of cars and trucks in the world. Ford’s main competitor are General motors which is ranked one and Toyota which is ranked third.

In the tough automotive industry, the advantage is to branch out and take risks to stand out with different designs or functions that will grab consumers’ interest. Economic Impact Increased fuel prices in the United States have largely affected all automotive manufacturers, including Ford. Ford’s SUV customers seem to struggle with these prices, which encourages Ford to manufacture smaller cars that use less fuel. To gain more customers, Ford has manufactured hybrid vehicles such as the Mercury Milan and the Ford Escape. Social-Cultural-Demographic Factors

Consumer needs and tastes largely affect the operational planning of Ford Motors. Customers continually demand safer, better-quality vehicles at lower prices, which forces Ford Company to search for cheaper ways and means of production including outsourcing parts of its productions. The company constantly needs to adopt new methods and approaches to create unique, attractive automobiles that appeal to consumers. Political-Legal-Governmental Forces Political factors also influence the strategic planning of Ford motor since government laws and regulations are concerned with the production of more eco-friendly automobiles.

Due to the environmental concerns, the industry has to abide with the regulations aimed at reducing the pollution levels. The Corporate Average Fuel Economy took effect in 1975, and Ford must abide with the existing regulations. Non-compliance attracts heavy fines, which prove costly to the company. These regulations also drive Ford to manufacture environmentally friendly and fuel-efficient cars. Governments in a bid to lower the unemployment rate discourage Ford Motors from fully automating its operation, which would otherwise take up local jobs. Environmental Influences

Ford Motor Company has become the first and only automotive company to certify its plants around the world under ISO 14001 — 140 plants in 26 countries. ISO 14001 is an environmental standard under which independent auditors evaluate environmental processes and system performance. The environmental milestone was marked in December at a ceremony at the Michigan Truck Plant, where a giant certificate representing certification of all 73 North American manufacturing plants was presented by representatives of Lloyd’s and VCA, the two independent auditing agencies used to certify the facilities.

“Being ISO 14001 certified means that experts outside of Ford agree that we are world class in terms of environmental management,” said Jim Padilla, group vice president, Manufacturing. “Achieving ISO certification also highlights Ford’s philosophy that environmental excellence is an element of both good business and corporate citizenship. ” The discipline put into place by Ford employees worldwide has already begun to pay big dividends in terms of the environment and cost savings. For

example, Ford has reduced the amount of disposable packaging coming into plants by 163 million pounds in the last two years, a reduction of more than 25 percent on a per-vehicle basis. Materials such as cardboard and plywood, which used to go in landfills, have been replaced by containers made of reusable materials such as plastic or metal. In North America, the disposal of paint sludge, which is the over-spray from paint booths, has been dramatically reduced in 10 plants so far. A process that recycles the sludge has kept 17,052 tons of paint waste from going to landfills since 1995.

In addition, Ford uses a Total Waste Management system that provides monetary incentives to suppliers for reducing waste. Rather than paying by the barrel or load, Ford now pays waste removal suppliers on a scale that doesn’t reward for sheer quantity — for instance, paying a fixed amount by month or by the number of cars and trucks produced. Not only is Ford the first automaker to certify its manufacturing facilities to ISO 14001 on a global basis, it also has more individual facilities in the world certified under the standard than any other company.

Certification for more than 140 Ford sites — including Visteon and Jaguar plants. Ford also is a leader in clean vehicle technology. All Ford Expeditions and Lincoln Navigators built at Michigan Truck are sold nationwide as low-emission vehicles (LEVs), emitting almost 70 percent fewer smog-forming hydrocarbon emissions than allowed by California’s 1999 standards. In fact, all Ford and Lincoln Mercury sport utility vehicles, along with the Windstar minivan, are classified as LEVs beginning this year. Technological Changes The automobile industry is largely competitive due to the demand of consumers and vehicle similarity.

In the automotive industry a certain vehicle brand or company must be distinct and unique with similar features available in each vehicle. One company that incorporates design, creativity, and innovation into its product is Ford Motor Company. Ford Motor Company has achieved the goal of making its automobiles unique because of its heavy, strong trucks, efficient gas saving sedans, and unique structure and appearance. Due to constant brainstorming sessions on designs and creativity, Ford Motor Company has developed some of the top rated vehicles in the United States.

Moreover, it will continue to strive to meet the needs of consumers with fresh designs, products, new ideas, and features to its automobiles. Trends Imagine being able to look into a crystal ball and predict the future. Metaphorically speaking, that’s what Sheryl Connelly does on a daily basis in her role as manager of Global Trends and Futuring for Ford Motor Company. But instead of a soothsayer’s ball, she relies on an ever-expanding repertoire of knowledge, a keen ability to research and analyze information, and a natural gift for communicating with others.

“My job is to look outside the automotive industry to understand what’s happening in social, technological, economic, environmental and political arenas so that we can understand shifts that are coming that may influence consumers’ values, attitudes and behaviors,” said Connelly. “I look for those insights and collaborate with people in Ford Design and Product Development who try to turn them into business propositions. ” Internal Analysis COMPANY PROFILE Ford, number four in the Fortune 500, is a huge conglomerate and the top pick-up truck producer in the world.

Only General Motors, its greatest competitor, makes more cars. Toyota and DaimlerChrysler are other top competitors. Ford has grown so large that it has bought out many competitors in the car industry including Volvo, Aston Martin, Jaguar, Lincoln, Land Rover, Mercury, and 33% of Mazda. Ford and its subsidiaries operate over 26,000 dealerships worldwide. Strengths Community Relations: Ford has made numerous efforts to target the surrounding community. A breast cancer awareness campaign was created in which celebrities are enlisted to tell how breast cancer has affected them.

The company takes strides to protect the environment demonstrated by the development of an electric vehicle and efforts to increase fuel efficiency. Since the Sept. 11 attacks on America, Ford and its employees have made extensive donations and held fundraisers and events by Ford in response. (See Appendix) Employee Relations: Ford provides incentives for employees to work at high quality levels. For example, the “Thumbie” award is given to employees who demonstrate a high personal commitment to their customers and community. Higher wages are also characteristic of the company.

Hourly workers typically have wages from $19-$26 an hour, while skilled trade workers make $21-$30 an hour. For the last 20 years, Ford has issued no involuntary layoffs or dismissals of salaried employees, although this year may be an exception. The company also created a Family Service and Learning Center program for Ford workers, family members and retirees, offering health classes, after-school tutoring and trips for seniors. Investor Relations: Ford maintains a high level of communication with its investors and potential investors.

The company accurately and honestly reports earnings and losses in ways easily accessible by the public via company Web site, mailings, and print materials by request. \ Weaknesses Investor Relations: As a result of the recessing economy, investors are worried about slumping sales and profits, a possible dividend cut, a cash position that has fallen to $4 billion from $15 in a year, and now, the possibility of a credit downgrade. The Ford Board of Directors cut dividends on class B and common stock for the first time in a decade.

Due to increasing expenditures from recalls and severance packages shareholders aren’t getting as big of a return on their investments in the company. Employee Relations: Ford is using a “voluntary separation program” to lay off employees, and plans amount to the elimination of about 10 percent of Ford’s salaried workforce in North America (4,000-5,000 workers). According to workers at Ford’s world headquarters in Dearborn, Michigan, no one knew anything about the job cuts until an announcement was made on the radio, although people had been expecting layoffs.

A plan to cut all overtime, excluding plants mandated by union contracts or plants producing a highly popular product, has also been enforced. At the end of Sept 2001, three Ford assembly plants were working scheduled overtime. Last year, and into spring 2001, ten plants were working scheduled overtime. Customer Relations: Ford has recalled almost two million vehicles in 2001, with the Firestone tire recalls alone costing the company more than $3 billion. Because such safety precautions are necessary, customers currently have little confidence in Ford products.

The company notifies owners of recalls via first-class mail, but this will not protect customers with unsafe vehicles from harm. Listed in the annual report are a number of ways Ford targets their customers. The company provides a Customer Insight Center to train employees to respond to the needs of customers, interact with customers at race events, and talk with customers “face-to-face at auto shows and at dealerships. ” Ford does nothing else to show their customers how important they really are.