FORD MOTOR COMPANY - 2009

PRESENTED BY : TEAM 6
HISTORY OF FORD
History of Ford
Founded by Henry Ford on June 16
th
,1903
Headquartered in Dearborn, Michigan
Worlds 5
th
largest automaker
Largest family controlled company in the world
13.8% market share as of Feb 2009
Two service businesses Ford Motor Credit
Company & Genuine Parts & Motocraft
Service Businesses

f
Offers innovative Products and competitive financing
rates with flexible terms



g
Know-how about parts, repairs & maintenance to
owners of Ford, Lincoln & Mercury


k
-Electric Autolite Company 1961
-Makes parts for Mercury, Lincoln and Ford ranging
from motor oils to transmission assemblies
-Due to lack of replacement vehicle parts by
manufacturers
Fords Divisions
Lincoln/Mercury (NA & Middle East)
-Lincoln MKZ ($34,190)
-Navigator ($61,480)

Volvo (safe vehicle)
Acquired in 1999
Sold in 2010 to Geely Automobile

-Land Rover (2008)
-Jaguar (2008)
-Aston Martin (1987-2007) Prodrive

Mazda (33.4% share)
CASE BACKGROUND
Case Background
The Financial Crisis in 2008 engulfed the entire US
automobile 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
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 Aston
Martin 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



FINANCIAL ANALYSIS
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
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

PROBLEM IDENTIFICATION
Major Problems
Decline in sales
Loss of market share
Has 1 billion $ as goodwill
154 billion $ as long term debt
Other persistent problems
1) Many competitors in the market
a) Chryslar LLC
b) General Motors Corporation
c) Toyota Motor Corporation
d) U.S Government
2) Global economic recession
3) Low consumer confidence
4) High unemployment
5) Unavailability of credit
COMPETITORS
COMPETITORS OF FORD
Main competitors of Ford in the U.S. market
are General Motors, Toyota and Chrysler.
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



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

CPM Matrix
CPM MATRIX FORD TOYOTA GM CHRYSLER
Critical Success
Factors
Weight 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 0.3
Price 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
Vehicles
0.10 2 0.2 3 0.3 2 0.2 2 0.2
Total 1.00 3 3.5 3.1 2.6
PORTERS FIVE FORCES ANALYSIS
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
BUYERS POWER (-)
1. Global economic recession
2. Increased unemployment rate
3. Low consumer demand for new autos
4. 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 acquisitions
6. Ability to afford


THREAT OF SUBSTITUTION (+)
1. Rising fuel prices - public transportation
2. No effect in near future
SWOT ANALYSIS
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.

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.

Opportunities:

Ford has recognized the importance of small, fuel efficient vehicles and is actively
transitioning 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 One Ford vision has the chance to generate significant margin increases for
Fords smaller 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 release
in 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.

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 One Ford strategy 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 Fords suppliers.
Current managed bankruptcy proposals for General Motors could allow GM to emerge
from bankruptcy in a significantly advantaged cost position.
GRAND STRATEGY MATRIX
GRAND STRATEGY MATRIX
FORD
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
RECOMMENDATIONS
Recommendations
Research
The company should focus more on the designs of its
products and come up with more diverse and efficient
models
Innovation
Ford should engineer the product innovatively to gain
attraction of a large population
Price
The small cars concept can achieve its goals only if it is
priced properly as developing markets are highly price
sensitive
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 which
can wait till the Global Economy stabilizes
Supply Chain Management

WHAT FORD ACTUALLY DID
What Ford did
The One Ford Strategy
CEO, Alan Mulally
Implementing the strategy
Way Forward
Challenges
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

Pickups and SUVs
F-150 pickup ,Ford Escape and Mercury Mariner
SUVs
Added shifts due to demand Michigan, Missouri
Back to 3 shift operation Dearborn, Michigan,
Kansas City, Missouri
Resulted in increased production
F-150 -10,000 units , Escape & Mariner-2,400
units

Cash for Clunkers program
Growth in sales for 3
rd
and 4
th
quarters of 2009
Started in July 2009 by US Government
Trade off for truck and cars with mileage of less
than 18 miles per gallon for $3.5k -$4.5k
2 Ford models in Top 10 - Focus(4
th
),Escape(10
th
)
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