Ford Motor
Content
Alen Badal
The Union Institute
F
www.ford.com
Ford recently received $5.9 billion in Energy Department loans to help retool its plants.m
Illinois, Kentucky, Michigan, Nlissouri. and Ohio to produce 13 fuel-efficient models, including 5,000 to 10,000 eiectric cars per year starting in2011. In mid-2009, Nissan Motor
was granted $1.6 billion in loans also from the U.S. Department of Energy to build as many
as 100,000 electric cars a year at its plant in Smyrna, Tennessee, by 2013.
Ford's newest competitor may be the U.S. government because GM and Chrysler LLC are
in line to get $62 billion in investments from the U.S. Treasury. GM and Chrysler have cut their
debt and closed hundreds of dealers with that money, while Ford still has $33 biilion in debt
including its obligations to retirees. Since CEO Alan Mulalty's arrival at Ford ln 2006, the company has cut 40,000 jobs and closed 17 plants, reducing costs by more than $5 biilion. Ford has
a $10 billion note that comes due in 2011.
Ford increased its production 16 percent in the third quarter of 2009 versus the third quarter
of 2008. This was good news for Ford shareholders and customers. In May 2009, Toyota posted
a $4.4 biilion loss for its fiscal year, the fust time Toyota posted an annual loss since 1963'
Virtually all automobile companies are suffering in the bad economy. Ford is on track, however'
to break even or perhaps make a profit in 2011.
Ford is aiso trying to sell its Volvo division but has decided to wait untii GM completes
the sale of its Opel division in effofts to get a higher price for Volvo. Three firms as of August
2009 were bidding on Volvo: Geely Holding Gto,,,p. Beijing Automotive Industry Holding, and
fust
a Europe-based group of investors. Sales of Volvo in the United States fell 36 percent in the
six months of 2009 as compared to 2008.
An American icon for over a century, Ford's revenue decreased from $172.5 billion in2007
to $146.3 billion in 2008. Born in 1863, Henry Ford founded Ford Motor Company in 1903
and launched the Model T in 1908. Henry died n lg41 . The great-grandson of Henry, William
Ford, is today chairman of the board of Ford. Exhibit 1 features the leadership of the Ford Motor
the
Company. Ford's icon vehicles, such as the lVlustang and the F-150 truck, can be spotted on
roadways worldwide.
Headquartered in Dearborn, Michigan, Ford has a 13.8 percent market share of the auto
two
industqr as of February 2009, as compared to L7.5 percent in2001 . Ford Motor operates
Motorcraft.
and
service businesses: Ford Motor Credit Company and Genuine Parts
Ford manufactures and distributes automobiies across six continents with a team of about
246,000 employees. The company operates about 108 plants globaliy and produces such models
and
as Ford, Lincoln, Mazda,Mercury, and Volvo. The company has sold its Jaguar, Land Rover'
Aston Martin businesses.
The subsidiary, Ford Motor Credit Company, offers auto frnancing to both dealers and
customers globally. The company also assists dealerships with funding for such purposes.as
improvin-e sites and acquiring real estate. Ford's Motorcraft division offers parts for its vehicles
throu-eh the company's Wbb sit6 (www.ford.com).
Ford's major competitors are General Motors, Toyota, and Chrysler. Ford and rival General
comMotors are losing market share to Toyota and other foreign automakers. Exhibit 2 and3 provide
m
share
market
three
in
is
number
Ford
Note
that
firms.
its
rival
versus
parative information on Ford
the United States. The 2009 Motor Trend truck of the year was the Ford F-150.
110
ALEN BADAL
=X-i=E?
G
Ford Motor Company Corporate
Offil95
Willim
CIay Ford, Jr.,
Erecutive Chairmm
_t,__Alan MuIallY, President & CEO
_'
_t-_ ,-
Michael E. Bannister, Exec V.P'
Chairmm/CEO, Ford Credit
f
ohr Fleming,
Exec.
John G. Parker' Lxecutlve
Asia Pacfic & Africa
Lewis W. K. Booth, Exec. V P
V.P &
&:hiel:nd1ar on:er
Chairman/CEO Ford of EuroPe
v
P
Sorrce: www.ford.com
F::-=:*iT
?
Ford versus Toyota and the lndustry
Ford
Toyota
lndustry
135.38
24.98
)1)
33,200
113.88
193.98
14.58
Gross Margin
1.697o
7.25Vo
11.837a
Earnings Before Interest and Taxes
2.958
4.368
t76.2M
Net Income
-5.228
EPS
-2.012
-9.288
-5.92
-0.14
Market Capitalization
213,000
# Employees
Revenue
Note:
$24.98
2,)A
M= miliion; B = billion
Source: Based on info at www financeyahoo'com
..9
3
=t{#E=;T
CompanY
(February 2009)
The U.S. Market Share of Top 11 Auto Firms
% of Market Share
General Motors CorP.
Toyota Motor Sales USA Inc.
Ford Motor ComPanY
Chrysler LLC
American Honda Motor Co. Inc'
Nissan North America lnc.
Hyundai Motor America
Kia Motors America Inc.
Mazda Motor of America Inc'
Subaru of Ameriga IncMitsubishi Motors N A, Inc.
Source:Basedonhttp://onlhe.wsj.com/mdc/publiclpagel2-3022.autosales.html#autoSalesD.
18.8
16.9
13.8
10.9
10.6
8.0
4,7
J.J
2.4
r.9
0.7
CASE
12
.
FORD MOTOR COMPANY
Company Brands
Ford consists offive brands and is generally perceived as being an affordable brand name catering to a variety of consumer needs and wants. The vehicles span cars, trucks, and super utility
vehicies (SUVs). Ford also produces the Nlondeo found in Europe and the EcoSport in South
America and some parts of Asia.
Lincoln/Mercury
Ford's Lincoln (www.lincoln.com) vehicles are perceived as a 1uxury line and inciude five models
such as the popuiarNavigator andTorvn Car. Ford's Mercury (www.mercuryvehicies.com) Line also offers
five different models, such as the lVlountaineer and the Mi]an.
Mazda
line named after the ancient god of wisdom is Nlazda (www.mazda.com).
Mazda evolved in 1931 representing a three-wheeled truck combining a motorcycie
and automobile. Mazda today offers 11 different models along with its Mazda Verisa.
The company posted sales in the first nine months of fiscal 2008 of 2.i million yen G).
The company's Web site contains information about Mazda in some 54 different countries. Mazda's revenues dropped from 2.5 million yen in the first nine months of 2001 to
A
Japanese
2.0 miilion yen during that period in 2008.
Volvo
Volvo (www.volvocars.com), a brand name that created the first three-point seat belt, has built
sffong brand recognition as a safe vehicie. Volvo in 1955 began exporting cars to the United States.
Ford acquired Voivo in 1999, but the division is now up for sale. Volvo markets in some 58 countries. This Sweden-headquartered division sells the Lhe in more than 185 markets. This division
soId,3'74,29'7 units worldwide in 2008, an 18 percent decrease in sales from2007. The stronger
demand was in the United Kingdom while the U.S. and Sweden markets weakened. Volvo achieved
ner sales of $14.7 bilLion in 2008, compared to $17.9 billion in 2001, as described in Exhibit 4.
Ford Motor Credit
Founded in 1923, Ford Motor Credit Company (www.fordcredit.com) offers financing to consumers and dealerships nationwide and is the world's largest finance company. Ford Credit offers
innovative products and competitive financing rates with flexible terms applied toward leasing
and/or financing purchases.
Genuine Parts & Service
Genuine Parts & Service (www.genuiaeflmservice.cdm) offers the know-how about parts, repairs,
and maintenance to owners of Ford, Lincoln, and Mercury vehicles. First introduced in 1991, the
concept was to help provide better owner satisfaction, which has provided better vehicle brand success
for Ford.
=;=rg:?
+
Ford Motor Company Sector Revenues (2007 vs. 2008)
2008
2007
Sector
North America
$71.5 billion
$53.4 billion
South America
$
$
Europe
$39 billion
Volvo
Asia Pacific/Africa
$36.5 billion
$17,9 billion
$ 7 billion
lViazda
$o
$15 billion
$0
$0
billion
S17
JLR
& Aston Martin
Financial Services
Source. Adapted from www.ford.com.
$
1
7.6 billion
8
8.6 billion
$14.7 billion
$
6.5 billion
billion
- 2OO9
111
112
ALEN BADAL
Motorcraft
Ford purchased Electric Autolite Company in 1961 and later changed the name to Nlororcrair
(www.motorcraft.com), which makes parts for Mercury, Lincoln, and Ford vehicles. Tlie drir_
sion is a subsidiary business offering premium parts/services ranging from motor oii to tlansrnis,
sion assemblies. This business emerged for Ford as a result of the iack of replacement yehiclc
parts available by the manufacturers.
Global 0perations
Ford markets vehicles in over 200 markets across 6 continents. Ford's recent One Ford strares\,
focuses on standardizing the production of vehicles, technologically tracing producdon thr.ouJout the life cycle, cross-shipping of components to ensure speedier time to markets, and findirs
the Ford-ingredients to meet the automotive needs of the global market. One such
i--,
"xampi.
Ford's Fiesta, which is availabie in Europe and expected in 2010 in the United States.
For.c1's
truck lines are still sffong with the award-winning F-150.
The Euro (€), British pound (f), and the Japanese yen (T) currencies have been va1_red
more than the U.S. dollar ($). Ford's North America sales have dropped substantially; howeve..
South America and Europe achieved sales increases in 2008 for Ford, as shown in Exhibit 4.
Ford's income statements are provided in Exhibit 5. Note Ford's massive losses in both
2006 and 2008. Ford's balance sheets are provided in Exhibit 6. Note that Ford is carrying oveL
=XliE*CT
5
Ford
Motor Company lncome Statement
(all numbers in thousands)
Period Ending
31-Dec-08
31-Dec-07
31-Dec-05
Total Revenue
146,277,000
t12,455,000
160,123,000
Cost of Revenue
127,103,000
142,581,000
148,869,000
19,l'74,000
29,868,000
11,254,000
21,430,000
21,169,000
19,180,000
Gross Profit
Operating Expense
Research Development
Selling Gen & Admin
Non Recurring
Others
Total Operating Expenses
Operating Incorne or Loss
Income from Continuing Oper
Total Other IncomelExp. Net
EBIT
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest
Net Income from Cont. Ops
2,400,000
"q
1,874,000
668,000
241,C00
(4,130,000)
(5,631,000)
(8,167,S$$)
(75s,000)
(i,ss0,000)
(1,899,000)
(4,122,000)
(7,181,000)
(6,268,000)
9,682,000
10,92'7,000
8,783,000
(14,404,000)
(3;746,000)
(1s,051,000)
63,000
(r,294,000)
(2,646,000)
(214,000)
(312,000)
(210,000)
(14,681,000)
(2,764,000)
(12,61s,000)
9,000
41,000
2,000
(14,672,000)
(2,723,000)
(12,613,0G0)
Non-recurring Events
Discontinued Operations
Extraordinary Items
Effect of Acct. Changes
Other Items
Net Incorne
Soarce. www.ford.com
CASE
=-d!-:c=;?
€
12
.
FORD MOTOR COMPANY
- 2OO9
Ford's Balance Sheets
(all numbers in thousands)
31-Dec-08
31-Dec-07
31-Dec-06
$22,049,000
$35,283,000
$28,894,000
Not Receivables
6,165,000
8,863,000
8,'772,000
Inventory
8,618,000
10,121,000
11,578,000
PERIOD ENDING
Assets
Current Assets
Cash and Cash Equivalents
Short Term Investments
Other Current Assets
Total Current Assets
Long Term Investments
Properry Plant and Equipment
Goodwill
36,832,000
54,267,000
49,244,000
112,487,000
160,676,000
136,378,000
54,303,000
36,239,000
38,505,000
1,190,000
1,504,000
5,839,000
403,000
565,000
30,932,000
10,005,000
22.513,000
t2,106,000
3,108,000
3,500,000
,X,950,000
2i.8,328,000
279,264,000
278,554,000
78,158,000
44,111,000
24,416,000
4,093,000
28,128,000
78,158,000
48,504,000
52,544,000
154,196,000
168,530,000
172,049,000
55,000
50,158,000
51,411,000
2,035,000
5,023,000
4,790,000
1,195,000
1,421,000
1,159,000
235,639,000
273,636,000
282,019,000
Intangible Assets
Accumulated Amortization
Other Assets
Deferred Long Term Charges
Total Assets
Liabilities
Current Liabilities
Accounts Payabie
ShorVCurrent Long Term Debt
Other Current Liabilities
Total Current Liabilities
Long Term Debt
Other Liabilities
Deferred Long Term Liabiiity Charges
Nlinority Interest
Negative Goodwill
Total Liabilities
Stockholders' Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
24,000
(16,145,000)
t2 000
(1,48s,000)
19,000
(
17,000)
83,000)
Treasury Stock
(
181,000)
(i85,000)
(1
Capital Surplus
9,076,000
7,834,000
4,562,000
Other Stockholders' Equity
(10,085,000)
(s58,000)
(7,846,000)
Total Stockholders' Equity
Total Liabilities and SE
(17,31tr,000)
5,628,000
(3,465,000)
218,328,000
279,264,000
278,554,000
,Soarce. www.ford.com
113
114
ALEN BADAL
$1 biilion in goodwill, which is not good. Nor is its $154 billion in long-term debt a good
thing. The company may be doing better than some of its rival firms, but make no mistake,
Ford is in financial trouble.
Ford produces energy hybrid vehicles and has joined forces with Bdtish Petroleum (BP)
to deveiop hydrogen power. Ford's Rouge Center in Dearborn, Michigan, represents the
world's largest living roof and covers the Dearborn Truck Plant's final assembly building.
Competitors
Chrysler LLC
Founded in 1883, Chrysler LLC (www.chrysler11c.com) currently holds 10.9 percent of
the U.S. market share as of February 2009. At the conclusion of fiscal 2008, Chrysler
employed approximately 54,001 employees. A privatety owned company, Cerberus
Capital Management, currently owns 80.1 percent of Chrysler, with the remainder owned
by Daimler, the former parent company of Chrysler. The company manufactures seven
different models, including Jeep and Dodge. Chrysler LLC also owns Global Electric
IVlotorcars (GEM), low-speed vehicles often used in parks and industrial campuses.
The company sells parts and vehicle accessories under a MOPAR brand name and has
a Chrysler Financial division, which offers financing opportunities for buyers in North
America, Puerto Rico, and Venezuela.
Chrysler received $9 billion in bailout monies from the United States, with a
possibility of needing an extra $3 billion. It reportedly used up $3 billion in cash in
the last qua.rter of 2008. Headed by previous CEO of Home Depot, Robert Nardelli,
Chrysler had requested $7 billion in "bridge funding" to save the company.
Chrysler has contractqd with Nissan and Volkswagen to manufacture cars. This
cost-saving strategy, coupled with speculations of Envi, an electric car, and smaller cars
built by Nissan, are expected to improve the firm's financial position. Chrysler's sales in
February 2009 as compared to February 2008 were down 44 percent.
General Motors Corporation (GM)
Headquartered rn Detroit, Nlichigan, GM (www.gm.com) employs approximately 244,500
and reported annual revenues of $149 billion in 2008 as compared to $181 billion in 2007. GN4
manufactures cars and trucks in 34 countries. GM also operates a Financing and Insurance
Operation. Saab, Pontiac, and Cadiliac are among the many GM models. GM holds an industry leading 18.8 percent of the U.S. market share as of February 2009. GM's sales in February
2009 when compared to the prior year were down by 53 percent.
GIff experienced a steady decline in sales and received an $18 biilion (with more
requested) government bailout from the United States. GM's Saab division in Sweden
is attempting to isolate itself from GM to avoid the country losing a carmaker. Saab's
units-sold in 2008 were down 34.7 percent compared to 2001 . GM has plans to phase
out'its Saturn and Hummer brands. The plans also call for reducing Pontiac production.
GM has been criticized for not adapting its cars and production system to address
the needs of consumers. The future of GM is reliant on hybrid electric Chevy Volt along
with models such as the Malibu. GM's cars have produced negative sales figures, such as
a 50.9 percent reduction in Hummer units sold in 2008 as compared to 200'7. Chevrolet,
Cadillac, GMC, and Buick have ranged from 20.4 percent to 26.2 percent reduction in
units sold in 2008 compared to the previous year. GM's goal is to have a production-ready
fuel-cell vehicle by 2010.
Toyota Motor Corporation
"
Headquartered in Toyota City, Japan, Toyota Motor Corporation (www.toyota.cojp)
reported annual revenues of $249.5 billion in 2008. Toyota currently holds 16.9 percent of
the U.S..market drare as of February 2009. The company has 316,212 employees and was
founded in i933. It was ranked by J.D. Power and Associates as number one in customer
loyalty, with 68.9 percent of new purchases whose previous new vehicle was from Toyota.
Not all of Toyota's makes and models are manufactured in America; the company has
production plants across the globe.
CASE
12
.
FORD MOTOR COMPANY
Toyota operates in two segments: Automotive and Non-Automotive Operations. Toyota
models inciude the Corolla and R{V4. Its financial service helps consumers subsidize vehicles
and mortgage loans. Toyota provides financing to dealers. Other operations include designing
The
and manufacturing of prefabricated housing and information technoiogy reiated businesses.
company operates an e-commerce marketplace known as Gazoo.com and sells vehicles in Japan,
Nortfr.tmefica, Europe, and Asia. However, Toyota experienced a 40 percent decrease in revenues in February 2009 compared to 2008. Honda and Nissan experienced similar figures with a
decrease of 38 percent and3l percent, respectively.
Toyota is focusing on its all-new Prius, which promises fuel economy to exceed the current
model's 48 mpg. Also, Toyota will become the first automaker of a hybrid-only luxury car: the
Lexus HS250h, with fuel economy of 40 mpg.
lndustry Analysis
The auto manufacturing industry has been crushed of late by the global economic recession as consumer demand for new autos has plummeted. Consumer confidence is the iowest in 40 years, and
unemployment rates exceed 10 percent in many areas. Unavailability of credit and high unemployment have pushed automakers to rethink methods of producing and selling cars. Automakers have
faced rising costs of health care and pensions. The Big Three hope to gain further concessions from
the United Auto Workers regarding labor costs, among others, in times of hardship. The Big three
also suffer from an oversupply for dealers.
The few consumers purchasing vehicles are doing so for practicai reasons, with a focus on
fuel efficiency, durability, and carmaker's sustainability. Consumers are concerned over the Big
Three's possibility of going out of business in terrns of voided warranties. According to CSM
Worldwide, an automotive research firm, light vehicle production exceeded the production of
cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively.
Many banks are just not making car loans. This situation has been detrimentai to auto firms.
In 2008, the Big Three began offering lowered interest rates or zero percent financing to lure buyers. Ford, Chrysler, and even Toyota are offering employee prices to consumers.
The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuelefficient vehicles. The government baiiout money is diminishing, and Ford has exhausted its
credit lines.
Emergi ng
Automotive IVlarkets
While the economy in the United States slowed and new car sales drastically declined, Russia's
grew 15.1 percenr, Brazii's 15.5 percent, China's I1, percent, and India's 5 percent, respectively,
in the third quarter of 2008. GM and Ford have had some success in markets outside the United
States. GM achieved 61 percent of total revenues in the third quarter of 2008 outside of North
America. Ford is counting on China for sales as is Volkswagen, AG'
The Future
Ford's midsize 2010 Fusion in August 2009 set a monthly saies record for the model for the fifth
consecutive month. A sedan redesigned for the 2010 model year, the Fusion competes with the
high-volume Toyora Camry and Honda Accord in one of the biggest segments of the U.S. auto
market. "It's a very tough segment to be in. It's been dominated by the imports over the last several years," Chantel Lenard, Ford's global smail and medium car group marketing manageq said
in an interview. "We,are starting to break through and break that grip the imports have had on that
segment."
The Fusion has a long way to go to meet the U.S. sales volumes generated by the Toyota
Camry and Honda Accord. Through July, sales of Ford's Fusion totaied 102,756 in 2009, while
Camry sales totaled 184,216 andAccord totaled 160,817. Both the Camry andAccord cracked
the top 10 in cars bought under the U.S.-government Cash-for Ciunkers incentive program that
ended in August 2009. Ford reported strong Fusion sales in the program, but it did not crack the
top 10 list.
In late 2009, Ford added shifts at its truck plants in Michigan and Missouri due to increased
demand for its F-150 pickup trucks and Escape SUVs. The company's Dearborn, Michigan,
- 2009
115
116
ALEN BADAL
truck plant and the Kansas City, Missouri, plant returned to a three-shift operation. The action
increased production of F-150 pickup trucks by about 10,000 units and boosted production
of
Ford's Escape and Mercury Mariner SUVs together by 2,400 units.
Ford's increased production for the third and fourth quarters of 2009 were somewhat
driven by strong sales in the Cash for Clunkers program. The program, launched by the U.S.
government in July 2009, enabled qualifying consumers to trade in ther old, gas-guzzling
cars
and trucks with a mileage of 18 miles per gallon (mpg) or less for a value of up to
$:,soo_
$4,500. Ford had two models in the top-10 buy iist of the Cash for Clunkers program. The
company's Ford Focus (30 mpg) ranked fourth and Ford Escape SUV (24 mpg) ranked tenth.
Ford boosted third quarter 2009 production in North America to 495,000 vehicles and then
produced 570,000 vehicles for the fourth quarter, a 33 percent rise from the year-ago period.
For July 2009, Ford reported an astounding 2 percent year-over-year sales gain when other
major automakers reported deciines. The sales gain was the company's f11st since November
2007. Ford still, however, is in financiai troubie.
The Union Institute
F
www.ford.com
Ford recently received $5.9 billion in Energy Department loans to help retool its plants.m
Illinois, Kentucky, Michigan, Nlissouri. and Ohio to produce 13 fuel-efficient models, including 5,000 to 10,000 eiectric cars per year starting in2011. In mid-2009, Nissan Motor
was granted $1.6 billion in loans also from the U.S. Department of Energy to build as many
as 100,000 electric cars a year at its plant in Smyrna, Tennessee, by 2013.
Ford's newest competitor may be the U.S. government because GM and Chrysler LLC are
in line to get $62 billion in investments from the U.S. Treasury. GM and Chrysler have cut their
debt and closed hundreds of dealers with that money, while Ford still has $33 biilion in debt
including its obligations to retirees. Since CEO Alan Mulalty's arrival at Ford ln 2006, the company has cut 40,000 jobs and closed 17 plants, reducing costs by more than $5 biilion. Ford has
a $10 billion note that comes due in 2011.
Ford increased its production 16 percent in the third quarter of 2009 versus the third quarter
of 2008. This was good news for Ford shareholders and customers. In May 2009, Toyota posted
a $4.4 biilion loss for its fiscal year, the fust time Toyota posted an annual loss since 1963'
Virtually all automobile companies are suffering in the bad economy. Ford is on track, however'
to break even or perhaps make a profit in 2011.
Ford is aiso trying to sell its Volvo division but has decided to wait untii GM completes
the sale of its Opel division in effofts to get a higher price for Volvo. Three firms as of August
2009 were bidding on Volvo: Geely Holding Gto,,,p. Beijing Automotive Industry Holding, and
fust
a Europe-based group of investors. Sales of Volvo in the United States fell 36 percent in the
six months of 2009 as compared to 2008.
An American icon for over a century, Ford's revenue decreased from $172.5 billion in2007
to $146.3 billion in 2008. Born in 1863, Henry Ford founded Ford Motor Company in 1903
and launched the Model T in 1908. Henry died n lg41 . The great-grandson of Henry, William
Ford, is today chairman of the board of Ford. Exhibit 1 features the leadership of the Ford Motor
the
Company. Ford's icon vehicles, such as the lVlustang and the F-150 truck, can be spotted on
roadways worldwide.
Headquartered in Dearborn, Michigan, Ford has a 13.8 percent market share of the auto
two
industqr as of February 2009, as compared to L7.5 percent in2001 . Ford Motor operates
Motorcraft.
and
service businesses: Ford Motor Credit Company and Genuine Parts
Ford manufactures and distributes automobiies across six continents with a team of about
246,000 employees. The company operates about 108 plants globaliy and produces such models
and
as Ford, Lincoln, Mazda,Mercury, and Volvo. The company has sold its Jaguar, Land Rover'
Aston Martin businesses.
The subsidiary, Ford Motor Credit Company, offers auto frnancing to both dealers and
customers globally. The company also assists dealerships with funding for such purposes.as
improvin-e sites and acquiring real estate. Ford's Motorcraft division offers parts for its vehicles
throu-eh the company's Wbb sit6 (www.ford.com).
Ford's major competitors are General Motors, Toyota, and Chrysler. Ford and rival General
comMotors are losing market share to Toyota and other foreign automakers. Exhibit 2 and3 provide
m
share
market
three
in
is
number
Ford
Note
that
firms.
its
rival
versus
parative information on Ford
the United States. The 2009 Motor Trend truck of the year was the Ford F-150.
110
ALEN BADAL
=X-i=E?
G
Ford Motor Company Corporate
Offil95
Willim
CIay Ford, Jr.,
Erecutive Chairmm
_t,__Alan MuIallY, President & CEO
_'
_t-_ ,-
Michael E. Bannister, Exec V.P'
Chairmm/CEO, Ford Credit
f
ohr Fleming,
Exec.
John G. Parker' Lxecutlve
Asia Pacfic & Africa
Lewis W. K. Booth, Exec. V P
V.P &
&:hiel:nd1ar on:er
Chairman/CEO Ford of EuroPe
v
P
Sorrce: www.ford.com
F::-=:*iT
?
Ford versus Toyota and the lndustry
Ford
Toyota
lndustry
135.38
24.98
)1)
33,200
113.88
193.98
14.58
Gross Margin
1.697o
7.25Vo
11.837a
Earnings Before Interest and Taxes
2.958
4.368
t76.2M
Net Income
-5.228
EPS
-2.012
-9.288
-5.92
-0.14
Market Capitalization
213,000
# Employees
Revenue
Note:
$24.98
2,)A
M= miliion; B = billion
Source: Based on info at www financeyahoo'com
..9
3
=t{#E=;T
CompanY
(February 2009)
The U.S. Market Share of Top 11 Auto Firms
% of Market Share
General Motors CorP.
Toyota Motor Sales USA Inc.
Ford Motor ComPanY
Chrysler LLC
American Honda Motor Co. Inc'
Nissan North America lnc.
Hyundai Motor America
Kia Motors America Inc.
Mazda Motor of America Inc'
Subaru of Ameriga IncMitsubishi Motors N A, Inc.
Source:Basedonhttp://onlhe.wsj.com/mdc/publiclpagel2-3022.autosales.html#autoSalesD.
18.8
16.9
13.8
10.9
10.6
8.0
4,7
J.J
2.4
r.9
0.7
CASE
12
.
FORD MOTOR COMPANY
Company Brands
Ford consists offive brands and is generally perceived as being an affordable brand name catering to a variety of consumer needs and wants. The vehicles span cars, trucks, and super utility
vehicies (SUVs). Ford also produces the Nlondeo found in Europe and the EcoSport in South
America and some parts of Asia.
Lincoln/Mercury
Ford's Lincoln (www.lincoln.com) vehicles are perceived as a 1uxury line and inciude five models
such as the popuiarNavigator andTorvn Car. Ford's Mercury (www.mercuryvehicies.com) Line also offers
five different models, such as the lVlountaineer and the Mi]an.
Mazda
line named after the ancient god of wisdom is Nlazda (www.mazda.com).
Mazda evolved in 1931 representing a three-wheeled truck combining a motorcycie
and automobile. Mazda today offers 11 different models along with its Mazda Verisa.
The company posted sales in the first nine months of fiscal 2008 of 2.i million yen G).
The company's Web site contains information about Mazda in some 54 different countries. Mazda's revenues dropped from 2.5 million yen in the first nine months of 2001 to
A
Japanese
2.0 miilion yen during that period in 2008.
Volvo
Volvo (www.volvocars.com), a brand name that created the first three-point seat belt, has built
sffong brand recognition as a safe vehicie. Volvo in 1955 began exporting cars to the United States.
Ford acquired Voivo in 1999, but the division is now up for sale. Volvo markets in some 58 countries. This Sweden-headquartered division sells the Lhe in more than 185 markets. This division
soId,3'74,29'7 units worldwide in 2008, an 18 percent decrease in sales from2007. The stronger
demand was in the United Kingdom while the U.S. and Sweden markets weakened. Volvo achieved
ner sales of $14.7 bilLion in 2008, compared to $17.9 billion in 2001, as described in Exhibit 4.
Ford Motor Credit
Founded in 1923, Ford Motor Credit Company (www.fordcredit.com) offers financing to consumers and dealerships nationwide and is the world's largest finance company. Ford Credit offers
innovative products and competitive financing rates with flexible terms applied toward leasing
and/or financing purchases.
Genuine Parts & Service
Genuine Parts & Service (www.genuiaeflmservice.cdm) offers the know-how about parts, repairs,
and maintenance to owners of Ford, Lincoln, and Mercury vehicles. First introduced in 1991, the
concept was to help provide better owner satisfaction, which has provided better vehicle brand success
for Ford.
=;=rg:?
+
Ford Motor Company Sector Revenues (2007 vs. 2008)
2008
2007
Sector
North America
$71.5 billion
$53.4 billion
South America
$
$
Europe
$39 billion
Volvo
Asia Pacific/Africa
$36.5 billion
$17,9 billion
$ 7 billion
lViazda
$o
$15 billion
$0
$0
billion
S17
JLR
& Aston Martin
Financial Services
Source. Adapted from www.ford.com.
$
1
7.6 billion
8
8.6 billion
$14.7 billion
$
6.5 billion
billion
- 2OO9
111
112
ALEN BADAL
Motorcraft
Ford purchased Electric Autolite Company in 1961 and later changed the name to Nlororcrair
(www.motorcraft.com), which makes parts for Mercury, Lincoln, and Ford vehicles. Tlie drir_
sion is a subsidiary business offering premium parts/services ranging from motor oii to tlansrnis,
sion assemblies. This business emerged for Ford as a result of the iack of replacement yehiclc
parts available by the manufacturers.
Global 0perations
Ford markets vehicles in over 200 markets across 6 continents. Ford's recent One Ford strares\,
focuses on standardizing the production of vehicles, technologically tracing producdon thr.ouJout the life cycle, cross-shipping of components to ensure speedier time to markets, and findirs
the Ford-ingredients to meet the automotive needs of the global market. One such
i--,
"xampi.
Ford's Fiesta, which is availabie in Europe and expected in 2010 in the United States.
For.c1's
truck lines are still sffong with the award-winning F-150.
The Euro (€), British pound (f), and the Japanese yen (T) currencies have been va1_red
more than the U.S. dollar ($). Ford's North America sales have dropped substantially; howeve..
South America and Europe achieved sales increases in 2008 for Ford, as shown in Exhibit 4.
Ford's income statements are provided in Exhibit 5. Note Ford's massive losses in both
2006 and 2008. Ford's balance sheets are provided in Exhibit 6. Note that Ford is carrying oveL
=XliE*CT
5
Ford
Motor Company lncome Statement
(all numbers in thousands)
Period Ending
31-Dec-08
31-Dec-07
31-Dec-05
Total Revenue
146,277,000
t12,455,000
160,123,000
Cost of Revenue
127,103,000
142,581,000
148,869,000
19,l'74,000
29,868,000
11,254,000
21,430,000
21,169,000
19,180,000
Gross Profit
Operating Expense
Research Development
Selling Gen & Admin
Non Recurring
Others
Total Operating Expenses
Operating Incorne or Loss
Income from Continuing Oper
Total Other IncomelExp. Net
EBIT
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest
Net Income from Cont. Ops
2,400,000
"q
1,874,000
668,000
241,C00
(4,130,000)
(5,631,000)
(8,167,S$$)
(75s,000)
(i,ss0,000)
(1,899,000)
(4,122,000)
(7,181,000)
(6,268,000)
9,682,000
10,92'7,000
8,783,000
(14,404,000)
(3;746,000)
(1s,051,000)
63,000
(r,294,000)
(2,646,000)
(214,000)
(312,000)
(210,000)
(14,681,000)
(2,764,000)
(12,61s,000)
9,000
41,000
2,000
(14,672,000)
(2,723,000)
(12,613,0G0)
Non-recurring Events
Discontinued Operations
Extraordinary Items
Effect of Acct. Changes
Other Items
Net Incorne
Soarce. www.ford.com
CASE
=-d!-:c=;?
€
12
.
FORD MOTOR COMPANY
- 2OO9
Ford's Balance Sheets
(all numbers in thousands)
31-Dec-08
31-Dec-07
31-Dec-06
$22,049,000
$35,283,000
$28,894,000
Not Receivables
6,165,000
8,863,000
8,'772,000
Inventory
8,618,000
10,121,000
11,578,000
PERIOD ENDING
Assets
Current Assets
Cash and Cash Equivalents
Short Term Investments
Other Current Assets
Total Current Assets
Long Term Investments
Properry Plant and Equipment
Goodwill
36,832,000
54,267,000
49,244,000
112,487,000
160,676,000
136,378,000
54,303,000
36,239,000
38,505,000
1,190,000
1,504,000
5,839,000
403,000
565,000
30,932,000
10,005,000
22.513,000
t2,106,000
3,108,000
3,500,000
,X,950,000
2i.8,328,000
279,264,000
278,554,000
78,158,000
44,111,000
24,416,000
4,093,000
28,128,000
78,158,000
48,504,000
52,544,000
154,196,000
168,530,000
172,049,000
55,000
50,158,000
51,411,000
2,035,000
5,023,000
4,790,000
1,195,000
1,421,000
1,159,000
235,639,000
273,636,000
282,019,000
Intangible Assets
Accumulated Amortization
Other Assets
Deferred Long Term Charges
Total Assets
Liabilities
Current Liabilities
Accounts Payabie
ShorVCurrent Long Term Debt
Other Current Liabilities
Total Current Liabilities
Long Term Debt
Other Liabilities
Deferred Long Term Liabiiity Charges
Nlinority Interest
Negative Goodwill
Total Liabilities
Stockholders' Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
24,000
(16,145,000)
t2 000
(1,48s,000)
19,000
(
17,000)
83,000)
Treasury Stock
(
181,000)
(i85,000)
(1
Capital Surplus
9,076,000
7,834,000
4,562,000
Other Stockholders' Equity
(10,085,000)
(s58,000)
(7,846,000)
Total Stockholders' Equity
Total Liabilities and SE
(17,31tr,000)
5,628,000
(3,465,000)
218,328,000
279,264,000
278,554,000
,Soarce. www.ford.com
113
114
ALEN BADAL
$1 biilion in goodwill, which is not good. Nor is its $154 billion in long-term debt a good
thing. The company may be doing better than some of its rival firms, but make no mistake,
Ford is in financial trouble.
Ford produces energy hybrid vehicles and has joined forces with Bdtish Petroleum (BP)
to deveiop hydrogen power. Ford's Rouge Center in Dearborn, Michigan, represents the
world's largest living roof and covers the Dearborn Truck Plant's final assembly building.
Competitors
Chrysler LLC
Founded in 1883, Chrysler LLC (www.chrysler11c.com) currently holds 10.9 percent of
the U.S. market share as of February 2009. At the conclusion of fiscal 2008, Chrysler
employed approximately 54,001 employees. A privatety owned company, Cerberus
Capital Management, currently owns 80.1 percent of Chrysler, with the remainder owned
by Daimler, the former parent company of Chrysler. The company manufactures seven
different models, including Jeep and Dodge. Chrysler LLC also owns Global Electric
IVlotorcars (GEM), low-speed vehicles often used in parks and industrial campuses.
The company sells parts and vehicle accessories under a MOPAR brand name and has
a Chrysler Financial division, which offers financing opportunities for buyers in North
America, Puerto Rico, and Venezuela.
Chrysler received $9 billion in bailout monies from the United States, with a
possibility of needing an extra $3 billion. It reportedly used up $3 billion in cash in
the last qua.rter of 2008. Headed by previous CEO of Home Depot, Robert Nardelli,
Chrysler had requested $7 billion in "bridge funding" to save the company.
Chrysler has contractqd with Nissan and Volkswagen to manufacture cars. This
cost-saving strategy, coupled with speculations of Envi, an electric car, and smaller cars
built by Nissan, are expected to improve the firm's financial position. Chrysler's sales in
February 2009 as compared to February 2008 were down 44 percent.
General Motors Corporation (GM)
Headquartered rn Detroit, Nlichigan, GM (www.gm.com) employs approximately 244,500
and reported annual revenues of $149 billion in 2008 as compared to $181 billion in 2007. GN4
manufactures cars and trucks in 34 countries. GM also operates a Financing and Insurance
Operation. Saab, Pontiac, and Cadiliac are among the many GM models. GM holds an industry leading 18.8 percent of the U.S. market share as of February 2009. GM's sales in February
2009 when compared to the prior year were down by 53 percent.
GIff experienced a steady decline in sales and received an $18 biilion (with more
requested) government bailout from the United States. GM's Saab division in Sweden
is attempting to isolate itself from GM to avoid the country losing a carmaker. Saab's
units-sold in 2008 were down 34.7 percent compared to 2001 . GM has plans to phase
out'its Saturn and Hummer brands. The plans also call for reducing Pontiac production.
GM has been criticized for not adapting its cars and production system to address
the needs of consumers. The future of GM is reliant on hybrid electric Chevy Volt along
with models such as the Malibu. GM's cars have produced negative sales figures, such as
a 50.9 percent reduction in Hummer units sold in 2008 as compared to 200'7. Chevrolet,
Cadillac, GMC, and Buick have ranged from 20.4 percent to 26.2 percent reduction in
units sold in 2008 compared to the previous year. GM's goal is to have a production-ready
fuel-cell vehicle by 2010.
Toyota Motor Corporation
"
Headquartered in Toyota City, Japan, Toyota Motor Corporation (www.toyota.cojp)
reported annual revenues of $249.5 billion in 2008. Toyota currently holds 16.9 percent of
the U.S..market drare as of February 2009. The company has 316,212 employees and was
founded in i933. It was ranked by J.D. Power and Associates as number one in customer
loyalty, with 68.9 percent of new purchases whose previous new vehicle was from Toyota.
Not all of Toyota's makes and models are manufactured in America; the company has
production plants across the globe.
CASE
12
.
FORD MOTOR COMPANY
Toyota operates in two segments: Automotive and Non-Automotive Operations. Toyota
models inciude the Corolla and R{V4. Its financial service helps consumers subsidize vehicles
and mortgage loans. Toyota provides financing to dealers. Other operations include designing
The
and manufacturing of prefabricated housing and information technoiogy reiated businesses.
company operates an e-commerce marketplace known as Gazoo.com and sells vehicles in Japan,
Nortfr.tmefica, Europe, and Asia. However, Toyota experienced a 40 percent decrease in revenues in February 2009 compared to 2008. Honda and Nissan experienced similar figures with a
decrease of 38 percent and3l percent, respectively.
Toyota is focusing on its all-new Prius, which promises fuel economy to exceed the current
model's 48 mpg. Also, Toyota will become the first automaker of a hybrid-only luxury car: the
Lexus HS250h, with fuel economy of 40 mpg.
lndustry Analysis
The auto manufacturing industry has been crushed of late by the global economic recession as consumer demand for new autos has plummeted. Consumer confidence is the iowest in 40 years, and
unemployment rates exceed 10 percent in many areas. Unavailability of credit and high unemployment have pushed automakers to rethink methods of producing and selling cars. Automakers have
faced rising costs of health care and pensions. The Big Three hope to gain further concessions from
the United Auto Workers regarding labor costs, among others, in times of hardship. The Big three
also suffer from an oversupply for dealers.
The few consumers purchasing vehicles are doing so for practicai reasons, with a focus on
fuel efficiency, durability, and carmaker's sustainability. Consumers are concerned over the Big
Three's possibility of going out of business in terrns of voided warranties. According to CSM
Worldwide, an automotive research firm, light vehicle production exceeded the production of
cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively.
Many banks are just not making car loans. This situation has been detrimentai to auto firms.
In 2008, the Big Three began offering lowered interest rates or zero percent financing to lure buyers. Ford, Chrysler, and even Toyota are offering employee prices to consumers.
The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuelefficient vehicles. The government baiiout money is diminishing, and Ford has exhausted its
credit lines.
Emergi ng
Automotive IVlarkets
While the economy in the United States slowed and new car sales drastically declined, Russia's
grew 15.1 percenr, Brazii's 15.5 percent, China's I1, percent, and India's 5 percent, respectively,
in the third quarter of 2008. GM and Ford have had some success in markets outside the United
States. GM achieved 61 percent of total revenues in the third quarter of 2008 outside of North
America. Ford is counting on China for sales as is Volkswagen, AG'
The Future
Ford's midsize 2010 Fusion in August 2009 set a monthly saies record for the model for the fifth
consecutive month. A sedan redesigned for the 2010 model year, the Fusion competes with the
high-volume Toyora Camry and Honda Accord in one of the biggest segments of the U.S. auto
market. "It's a very tough segment to be in. It's been dominated by the imports over the last several years," Chantel Lenard, Ford's global smail and medium car group marketing manageq said
in an interview. "We,are starting to break through and break that grip the imports have had on that
segment."
The Fusion has a long way to go to meet the U.S. sales volumes generated by the Toyota
Camry and Honda Accord. Through July, sales of Ford's Fusion totaied 102,756 in 2009, while
Camry sales totaled 184,216 andAccord totaled 160,817. Both the Camry andAccord cracked
the top 10 in cars bought under the U.S.-government Cash-for Ciunkers incentive program that
ended in August 2009. Ford reported strong Fusion sales in the program, but it did not crack the
top 10 list.
In late 2009, Ford added shifts at its truck plants in Michigan and Missouri due to increased
demand for its F-150 pickup trucks and Escape SUVs. The company's Dearborn, Michigan,
- 2009
115
116
ALEN BADAL
truck plant and the Kansas City, Missouri, plant returned to a three-shift operation. The action
increased production of F-150 pickup trucks by about 10,000 units and boosted production
of
Ford's Escape and Mercury Mariner SUVs together by 2,400 units.
Ford's increased production for the third and fourth quarters of 2009 were somewhat
driven by strong sales in the Cash for Clunkers program. The program, launched by the U.S.
government in July 2009, enabled qualifying consumers to trade in ther old, gas-guzzling
cars
and trucks with a mileage of 18 miles per gallon (mpg) or less for a value of up to
$:,soo_
$4,500. Ford had two models in the top-10 buy iist of the Cash for Clunkers program. The
company's Ford Focus (30 mpg) ranked fourth and Ford Escape SUV (24 mpg) ranked tenth.
Ford boosted third quarter 2009 production in North America to 495,000 vehicles and then
produced 570,000 vehicles for the fourth quarter, a 33 percent rise from the year-ago period.
For July 2009, Ford reported an astounding 2 percent year-over-year sales gain when other
major automakers reported deciines. The sales gain was the company's f11st since November
2007. Ford still, however, is in financiai troubie.
