A look at Ford Motor Company

[97RangerXLT]

RowdyRanger's post on his paper for school prompted this post...http://www.therangerstation.com/forums/showthread.php?t=16425

I was part of a group project that looked at Ford. I did the company history and overview and the issues facing Ford and the strengths and weaknesses. I also put the power point presentation together combining my slides with the other group members slides.

If you are interested, I can pm or email a link to the power point presentation.

Here is the history and issues portion. keep in mind this paper was only made for expanding on my power point slides in the presentation, so it is a little rough.

Ford: A brief overview.
Ford Motor Company was founded in 1903 by Henry Ford with the help of 11 investors who invested a total of $28,000. From 1908 to 1927 Ford manufactured the Model T. This was significant in the fact that Ford used an assembly line to produce the cars which in combination of giving higher wages to the workers and training them for one area of assembly cut employee turnover drastically and improved efficiencies so that a car was affordable to the general public. In those years over 15 million units were sold, making it the second most popular selling vehicle that Ford has made. In 1922 Ford bought Lincoln Motors. In 1932, Ford introduced the first single cast V8. In 1939, Ford created the Mercury division to bridge the gap between the economical Fords and the luxurious Lincolns. 1948 saw the introduction of the F Series pickups. This is Ford’s most popular selling vehicle and is still in production today. In fact, the sales of the F Series trucks accounts for almost half of Ford’s profits in the past few years. 1964 was the year Ford’s 3rd most popular car, the Mustang, was introduced. In 1979 Ford invests a 25% stake in Mazda and ten years later Ford buys Jaguar. 1981 Ford introduces the Escort which was its most popular economy car in the 80’s. 1983 saw the introduction of the Ranger as a small pickup (instead of a trim line on the F Series). The Ranger dominated the small truck market throughout the 80’s. 1987 Ford buys Aston Martin. 1996 Ford invests more in Mazda, giving it controlling interest at 33.4%. In 1999, Ford acquires Volvo and then buys Land Rover from BMW. In 2006, Ford mortgages all of its assets to raise cash for secured lines of credit for their restructuring plan through 2009. A total of $23.4 billion was raised. In 2006, Ford ends production on its 4th most popular car, the Taurus after a 20 year run. Analysts and customers both think that Ford made a big mistake in discontinuing their most recognized car. In 2007, Ford recognized this and is now renaming the Ford 500 and Ford Freestyle station wagon (which replaced the Taurus) to Taurus and Taurus X respectively. 2007 also saw Ford selling their Aston Martin Division to a British consortium.
Issues facing Ford.
I believe that some of the issues facing Ford are lagging sales and a competitive market. Gasoline prices are in the $3.00 range and expected to go up. This will hurt Ford’s F Series truck sales which accounts for about half of Ford’s profits. Ford, Lincoln, and Land Rover’s luxury SUV market will be affected as well. Ford saw a 13.2% decline in sales of their F Series trucks last year. Most of the other competitors also saw a decline in sales with the exception of Toyota. Toyota’s introduction of an all new Tundra pickup gave it a 58% increase in sales. (http://www.businessweek.com/lifestyle/content/jan2008/bw20080111_573238.htm?chan=search)
The cost of producing the cars and trucks has always been an issue with Ford. A major component of their cost has been the funding of the health care for their UAW workers and retirees. Ford reached an agreement with the UAW that would allow them to save them $1 billion a year. This puts their labor costs at about $30 to $35 per hour which is close to what Toyota’s costs are. Another step forward was getting the UAW to agree to a new pay scale for new hires which will now start out at $14.20 per hour. This is about half of what the current UAW members make. This will allow Ford to be more competitive and give them more money to put into research and design of better vehicles. (http://www.businessweek.com/autos/content/nov2007/bw20071115_169987.htm?chan=search)
Ford has lost U.S. market share annually since 1995. With earnings from South America and Asia not covering the losses in the US, Ford needs to look at possibly expanding their operations overseas. In 2007, Ford announces a $500 million investment to build small cars in Thailand, just weeks after launching production of small cars at a new $510 million facility in Nanjing, China. The first engines at the Thailand plant are scheduled to be completed in April. This will give Ford some leverage in the foreign market. (http://www.foxbusiness.com/markets/...estment-expand-india-operations_427349_6.html)

http://www.businessweek.com/lifestyle/content/jan2008/bw20080111_573238.htm?chan=search
January 13, 2008, 12:01PM EST
Ford saw the steepest decline, with F-Series, the category leader, down 13.2%. GM's Chevy Silverado was down 3%. Dodge Ram was down 2%. Sales of Nissan's Titan were down 9%. Honda's Ridgeline was down 15%. Toyota (TM), which launched an all-new Tundra pickup last January, sold 196,000, up 58%, but not without lathering on heavy sales incentives out of the gate. Pickup truck sales were 12% of total vehicle sales last year, compared with 15% of total vehicle sales in 2004. Gas Prices a factor?
http://www.businessweek.com/investor/content/jan2008/pi2008018_338675.htm?chan=search
January 8, 2008, 12:10PM EST
S&P KEEPS HOLD RECOMMENDATION ON SHARES OF FORD MOTOR
F; $6.28
We view the company's plan to invest $500 million to expand its Indian operations as important for its long-term growth there. We expect the Indian market to continue its rapid growth in vehicle sales amid swift economic gains. Although much of India's passenger car volume is for relatively small vehicles, compared to what sells in the U.S., we think it is critical for major non-Indian automakers to participate in that expanding market. With spending spread over three years, we believe the investment should not unduly strain struggling Ford's cash needs, and we keep our hold opinion. /E. Levy, CFA
http://www.businessweek.com/autos/content/nov2007/bw20071115_169987.htm?chan=search
November 15, 2007, 8:19PM EST
Ford said on Thursday the annual net cash savings from VEBA will be about $1 billion per year. Ford will pay $2.7 billion up front to fund the health-care trust, which is expected to be created by Jan. 1, 2010. The trust needs court approval and Securities & Exchange Commission accounting clearance. Ford expects a total contribution to the trust of $13.2 billion, including a transfer of $3.8 billion from existing health-care programs. In total, Ford has to come up with only about 56% of its future obligations.
The other big savings component for Ford is wages, including the UAW agreeing to a pay structure for new hires starting at $14.20 per hour, about half that of a current worker. The contract also includes no base pay increases for hourly workers, but gives them lump-sum payments of $3,000 this year plus lump sums in the remaining three years of $2,200 to $3,000, on average, Ford said.
Not only does the deal align Ford's labor costs with those of Toyota's U.S. costs, which are between $30 to $35 an hour when salary and benefits are combined, but it also allows Ford to close factories it doesn't need. The union agreed to let Ford shutter 10 plants it had designated for closure. But with the health-care savings and relaxed work rules the union agreed to, Ford is able to keep open some U.S. plants it planned to close, including four in Michigan, which has been hard hit by plant closures and downsizing of white-collar workforces at the automakers.

 

[RobbieD]

Interesting stuff; thanks for posting it.