Ford Finance Recruiting -- Freeze Business Case Ford Finance

FINANCE BBA PRE-SCREEN CASE

Fall 2008 / Spring 2009 Instructions In this fictitious case, you are a financial analyst in the Product Development Division of One World Automotive, a global manufacturer of automotive vehicles and products. Your responsibilities include financial evaluations for business decisions on the Fahrenheit midsize sedan. Attached are the relevant e-mails you have received and a worksheet that outlines the assumptions for the proposed Freeze series vehicle. For the review: 1. Review the attached material and prepare a one-page executive summary according to the instructions from the Product Marketing and Product Development managers. Please keep your work confidential and work independently on this exercise. 2. Please include the following items in your summary: a. Facts of the case and key assumptions b. Your recommendation on whether the Freeze series vehicle should be approved 3. Bring two additional copies of your one-page executive summary to the interview. Also, feel free to bring your back-up calculations or any supplemental analyses. Ford Finance Recruiting -- Freeze Business Case

Ford Finance

FINANCE BBA PRE-SCREEN CASE

Fall 2008 / Spring 2009
E-Mail #1 From: Sue Storm (Product Marketing Manager) To: Paul Klowd (Product Development Manager) Subject: Freeze Series Vehicle Paul, We have been working on ideas for a derivative series vehicle that will showcase One World Automotive's new fuel economy and consumer technology features. We believe that the new Freeze, based on the existing Fahrenheit midsize sedan, is the best segment in which to introduce these innovations. The features included in this Program are the following: Fuel-miser turbocharged 2.4L engine, which will generate greater horsepower than the existing 3.3L engine with improved fuel economy Dan-Synn voice-activated audio and navigation system with real-time traffic and other driver information capabilities Unique, light-weight 17" alloy wheels for improved fuel economy and appearance Upgraded leather seating with embroidered Freeze logo

We project that demand for this vehicle series will be 40,000 units for the upcoming final year of production for the present Fahrenheit vehicle. Please let me know what you think. E-Mail #2 From: Paul Klowd (Product Development Manager) To: Sue Storm (Product Marketing Manager) Subject: Freeze Series Vehicle Sue, The average revenue per-unit on today's Fahrenheit is $27,000 and the variable and fixed cost per-unit are $22,200 and $3,600, respectively. Do you have a projected profit for the Freeze? Engineering believes the investment for this Program will be between $75-100 million. Will the 40,000 units be an addition to present production volumes (incremental) or will they replace existing sales (substitute)? E-Mail #3 From: Sue Storm (Product Marketing Manager) To: Paul Klowd (Product Development Manager) Subject: Freeze Series Vehicle Paul, We project that 5-25% of the Freeze vehicle production will be incremental to existing sales, with the remainder being substitutions for existing sales volume. Attached is a copy of the Bill of Materials (BOM) which highlights the additional cost for the unique Freeze parts. ----Candidate, Please evaluate the profitability of the Freeze Program by: 1. performing a simple sensitivity analysis to assess the Program's financial viability; 2. providing possible solutions to improve the profitability; 3. assessing the impact of the Freeze Program on: a. Manufacturing b. Public Affairs c. Dealers

Ford Finance Recruiting -- BBA Pre-Screen Case

New Vehicle Programs BILL OF MATERIAL (BOM) WORKSHEET

Program Name: Base Program: Parts List Add or Delete Part Part Number Base Per-Unit Material Cost Extended Unit Cost Fahrenheit Midsize Sedan -- Freeze Fahrenheit -- 3.3L Limited Total Production Volume: Program Duration: 40,000 1 Year

Prefix

Suffix

Description

Quantity

Added Content: Add Add Add Add Add 11MS70 11MS70 11MS70 11MS70 11MS70 2SCE6 ESPZ9 1A222 3C44 2915 TC35 DSN AL 261 FY 2.4L Turbocharged Engine $ 8,150.00 Dan-Synn Navigation/Ent. Syst. 500.00 17" Alloy Wheels 125.00 P225/50R17 Tires w Raised Lettering 75.00 Upgraded Leather Seats 650.00 1 1 4 4 2 Total Adds: Deleted Content: Delete Delete Delete Delete Delete 08MS09 08MS09 05MS13 05MS13 08MS09 2SCE6 ESPZ9 1A222 3C44 2915 GS53 DSN AM 196 FW 3.3L Engine Premium Audio System 17" Aluminum Wheels P225/50R17 BSW Tires Base Leather Seats $ (6,590.00) (300.00) (110.00) (65.00) (580.00) 1 1 4 4 2 $ (6,590.00) (300.00) (440.00) (260.00) (1,160.00) $ (8,750.00) $ 10,750.00 (8,750.00) $ 2,000.00 $ 8,150.00 500.00 500.00 300.00 1,300.00

$ 10,750.00

Total Deletions: Total Added Content: Total Deleted Content: Net Material Cost Changes:

Incremental Revenue per Unit:

3,500.00

Note: Ford Finance Assessment material. Data are fictional and are not a forecast of financial performance.