Ford Motor Company 2009Alen BadalThe Union State

Case Abstract

Ford Motor Company is a comprehensive strategic management case that includes the companys calendar December 31, 2008 financial statements, competitor information and more. The case time setting is the year 2009. Headquartered in Dearborn in the U.S. state of Michigan, Ford Motor Company is traded on the New York Stock Exchange under ticker symbol F.

Ford operates in two segments: Automotive and Financing. Products offered include: Ford, Mercury, Lincoln, Volvo and Jaguar. Ford was founded in 1903 and operates worldwide. The company is led by CEO William Ford Jr. and employs over 280,000 people. The firms major competitor in the United States is General Motors.

Vision Statement (Actual)

Our vision is to become the worlds leading consumer company for automotive products and services.

Mission Statement (Proposed)

Ford Motor Companys mission is to anticipate consumer needs and provide safe, quality, reliable, and innovative automotive products and services to consumers around the world (1, 2, 3). Meeting and exceeding customers expectations for exceptional quality, cutting-edge technology, and superior customer service will enable us to maximize returns to our shareholders (4, 5). We are passionately committed to ensure we do the right thing for our customers, our employees, our environment, and our society (6, 9). Ford is committed to leading all automotive firms in quality and safety in America and abroad. Along with our commitment to saving the environment, we can continue to add to our proud heritage (7, 8).

1. Customer2. Products or services3. Markets4. Technology5. Concern for survival, profitability, growth6. Philosophy7. Self-concept8. Concern for public image9. Concern for employees

External Audit

CPM Competitive Profile Matrix

FordGMToyota

Critical Success FactorsWeightRatingWeighted ScoreRatingWeighted ScoreRatingWeighted Score

Price competitiveness0.0430.1220.0810.04

Global Expansion0.0540.2020.1030.15

Organizational Structure0.0210.0220.0430.06

Employee Morale0.0110.0120.0230.03

Technology0.0410.0420.0830.12

Product Safety0.0410.0420.0830.12

Customer Loyalty0.2020.4010.2040.80

US Market Share0.1520.4540.6030.30

Advertising0.0230.0640.0820.04

Product Quality0.0710.0720.1440.28

Product Image0.2020.4030.6040.80

Financial Position0.1610.1620.3240.64

Total1.001.972.343.38

Opportunities

1. The Big Three hope to gain further concessions from the United Auto Workers regarding labor costs2. The few consumers purchasing vehicles are doing so for practical reasons, with a focus on fuel efficiency, durability, and carmakers sustainability3. According to CSM Worldwide light vehicle production exceeded the production of cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively4. In 2008, the Big Three began offering lowered interest rates or zero percent financing to lure buyers5. The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuel-efficient vehicles6. Specialized in car parts for business/aftermarket7. Consumers/dealers willingness to improve brand/sales

Threats1. Due to global economic recession, consumer demand for new autos has plummeted2. Consumer confidence is the lowest in 40 years3. Unemployment rates exceed 10 percent in many areas in the United States and is expected to remain high for part of 20104. Unavailability of credit and high unemployment have pushed automakers to rethink methods of producing and selling cars5. Automakers have faced rising health care and pension costs6. The Big three also suffer from an oversupply for dealers7. The government bailout money is diminishing, and Ford has exhausted its credit lines8. Consumers are concerned about voided Warranties if the Big Three go out of business 9. Many banks are just not making car loansExternal Factor Evaluation (EFE) Matrix

Key External FactorsWeightRatingWeighted Score

Opportunities

1. The Big Three hope to gain further concessions from the United Auto Workers regarding labor costs0.0740.28

2. The few consumers purchasing vehicles are doing so for practical reasons, with a focus on fuel efficiency, durability, and carmaker's sustainability0.0730.21

3. According to CSM Worldwide light vehicle production exceeded the production of cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively0.0620.12

4. In 2008, the Big Three began offering lowered interest rates or zero percent financing to lure buyers0.0730.21

5. The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuel-efficient vehicles0.0630.18

6. Specialized in car parts for business/aftermarket0.0620.12

7. Consumers/dealers willingness to improve brand/sales0.0740.28

Threats

1. Due to global economic recession, consumer demand for new autos has plummeted0.0630.18

2. Consumer confidence is the lowest in 40 years0.0740.28

3. Unemployment rates exceed 10 percent in many areas in the United States and is expected to remain high for part of 20100.0740.28

4. Unavailability of credit and high unemployment have pushed automakers to rethink methods of producing and selling cars0.0540.2

5. Automakers have faced rising health care and pension costs0.0430.12

6. The Big three also suffer from an oversupply for dealers0.0720.14

7. The government bailout money is diminishing, and Ford has exhausted its credit lines0.0620.12

8. Consumers are concerned about voided Warranties if the Big Three go out of business0.0620.12

9. Many banks are just not making car loans0.0620.12

Total1.002.96

Positioning Map

Brand Loyalty (High)Brand Loyalty (Low)Price (High) Price (Low) HondaFord Motor CompanyGMToyota

Internal Audit

Strengths

1. Ford Credit Division operates globally2. Independent from Government bailout3. Vehicles marketed in 6 continents, over 200 countries 4. Ford has strong brand image and is considered an American icon5. Strong consumer loyalty on their popular F-1506. Diverse vehicle lines give the company more flexibility to their customers to choose the desired car model7. Sales in S. America and European segments increased by US$3.5 billion from 2007 to 2008

Weaknesses

1. In one year, revenue decreased by approximately US$30 billion2. While the companys inventory was reduced from 2007 to 2008, the dealers are having higher inventory to sell 3. Current asset dropped by approximately US$18 billion from previous year4. Current liabilities increased by US$30 billion from previous year5. Operational costs typically higher in a company with multi-segment business

Financial Ratio Analysis (December 2009)

Growth Rates %FordIndustryS&P 500

Sales (Qtr vs year ago qtr)-2.70-19.00-4.80

Net Income (YTD vs YTD)NA-21.00-6.00

Net Income (Qtr vs year ago qtr)719.30-18.0026.80

Sales (5-Year Annual Avg.)-2.512.9212.99

Net Income (5-Year Annual Avg.)NA1.6712.69

Dividends (5-Year Annual Avg.)NA8.7611.83

Price RatiosFordIndustryS&P 500

Current P/E RatioNA2.126.7

P/E Ratio 5-Year High10.32.968.0

P/E Ratio 5-Year Low4.90.49.9

Price/Sales Ratio0.300.572.25

Price/Book ValueNA1.133.48

Price/Cash Flow Ratio8.9025.7013.70

Profit Margins %FordIndustryS&P 500

Gross Margin7.411.238.9

Pre-Tax Margin-2.8-11.510.3

Net Profit Margin-3.6-10.67.1

5Yr Gross Margin (5-Year Avg.)10.019.238.6

5Yr PreTax Margin (5-Year Avg.)-3.44.916.6

5Yr Net Profit Margin (5-Year Avg.)-2.92.911.5

Financial ConditionFordIndustryS&P 500

Debt/Equity RatioNA1.411.09

Current RatioNA1.11.5

Quick RatioNA0.91.3

Interest Coverage-23.3-4.623.7

Leverage Ratio-23.41.83.4

Book Value/Share-2.6236.0321.63

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Avg P/EPrice/ SalesPrice/ BookNet Profit Margin (%)

12/08-0.800.04-0.32-10.0

12/07-5.800.082.62-1.6

12/06-1.100.09-4.09-7.9

12/0512.000.091.070.9

12/049.100.181.541.8

12/0330.500.182.510.4

12/0271.000.103.050.2

12/01-7.900.183.65-3.3

12/007.400.212.313.2

Book Value/ ShareDebt/ EquityReturn on Equity (%)Return on Assets (%)Interest Coverage

12/08-$7.18-8.9184.8-6.7-1.4

12/07$2.5629.94-49.1-1.0-0.5

12/06-$1.84-49.59364.5-4.5-1.9

12/05$7.2111.4012.10.6-0.2

12/04$9.529.3118.31.10.3

12/03$6.3615.445.50.2NA

12/02$3.0530.036.40.11.1

12/01$4.3121.51-68.7-1.9-4.3

12/00$10.148.9329.31.96.0

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Internal Factor Evaluation (IFE) Matrix

Key Internal FactorsWeightRatingWeighted Score

Strengths

1. Ford Credit Division operates globally0.0840.32

2. Independent from Government bailout0.0830.24

3. Vehicles marketed in 6 continents, over 200 countries 0.0730.21

4. Ford has strong brand image and is considered an American icon0.0830.24

5. Strong consumer loyalty on their popularF-1500.0830.24

6. Diverse vehicle lines give the company more flexibility to their customers to choose the desired car model0.0830.24

7. Sales in S. America and European segments increased by US$3.5 billion from 2007 to 20080.0940.36

Weaknesses

1. In one year, revenue decrease by approximately US$30 billion0.0910.09

2. While the company's inventory was reduced from 2007 to 2008, the dealers are having higher inventory to sell 0.0810.08

3. Current asset dropped by approximately US$18 billion from previous year0.110.1

4. Current liabilities increased by US$30 billion from previous year0.110.1

5. Operational costs typically higher in a company with multi-segment business0.0710.07

Total1.002.29

F.SWOT Strategies

StrengthsWeaknesses

1. Ford Credit Division operates globally2. Independent from Government bailout3. Vehicles marketed in 6 continents, over 200 countries 4. Ford has strong brand image and is considered an American icon5. Strong consumer loyalty on their popular F-1506. Diverse vehicle lines give the company more flexibility to their customers to choose the desired car model7. Sales in S. America and European segments increased by US$3.5 billion from 2007 to 20081. In one year, revenue decreased by approximately US$30 billion2. While the companys inventory was reduced from 2007 to 2008, the dealers are having higher inventory to sell 3. Current asset dropped by approximately US$18 billion from previous year4. Current liabilities increased by US$30 billion from previous year5. Operational costs typically higher in a company with multi-segment business

OpportunitiesS-O StrategiesW-O Strategies

1. The Big Three hope to gain further concessions from the United Auto Workers regarding labor costs2. The few consumers purchasing vehicles are doing so for practical reasons, with a focus on fuel efficiency, durability, and carmakers sustainability3. According to CSM Worldwide light vehicle production exceeded the production of cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively4. In 2008, the Big Three began offering lowered interest rates or zero percent financing to lure buyers5. The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuel-efficient vehicles6. Specialized in car parts for business/aftermarket7. Consumers/dealers willingness to improve brand/sales1. Expand into S. American and European countries by offering better incentives and financing (S1, S7, O3, O5, O7),2. Produce more fuel efficient and smaller models and promote them with lower financing options (S1, S3, O2, O5)

1. Improve operations by being more lean and cutting back excessive executive spending (W3, W4, W5, O1)2. Sell off business units to improve cash infusion to the company (W2, W3, W4, W5, O6)

ThreatsS-T StrategiesW-T Strategies

1. Due to global economic recession, consumer demand for new autos has plummeted2. Consumer confidence is the lowest in 40 years3. Unemployment rates exceed 10 percent in many areas in the United States and is expected to remain high for part of 20104. Unavailability of credit and high unemployment have pushed automakers to rethink methods of producing and selling cars5. Automakers have faced rising health care and pension costs6. The Big three also suffer from an oversupply for dealers7. The government bailout money is diminishing, and Ford has exhausted its credit lines8. Consumers are concerned about voided Warranties if the Big Three go out of business9. Many banks are just not making car loans1. Improve promotion on selected lower priced models with zero or very low rate financing to younger generation through Internet using Facebook, Twitter, and other networking channels (S2, S3, S4, S6, T1, T4, T6, T8, T9)2. Offer Free extended warranty for additional 2 years to gain customer loyalty and brand image (S4, S6, T1, T8)1. Since dealers are not able to turn around their inventory fast enough, offer co-op advertising with more incentives for moving the cars faster (W1, W3, T4, T6)

SPACE Matrix

FSCSESIS654321ConservativeAggressiveCompetitiveDefensive1234567-2-3-4-5-7-1-67-7-6-5-4-3-2-1

Financial Stability (FS)Environmental Stability (ES)

Return on Investment1Unemployment-5

Leverage1Technological Changes-3

Liquidity1Price Elasticity of Demand-2

Working Capital1Competitive Pressure-4

Cash Flow1Barriers to Entry-5

Financial Stability (FS) Average1Environmental Stability (ES) Average-3.8

Competitive Stability (CS)Industry Stability (IS)

Market Share-2Growth Potential4

Product Quality-3Financial Stability2

Customer Loyalty-2Ease of Market Entry4

Competitions Capacity Utilization-3Resource Utilization3

Technological Know-How-2Profit Potential3

Competitive Stability (CS) Average-2.4Industry Stability (IS) Average3.2

Y-axis: FS + ES = 1.0 + (-3.8) = -2.8X-axis: CS + IS = (-1.8) + (3.6) = 1.8

Grand Strategy Matrix

Weak Competitive PositionQuadrant IIQuadrant IQuadrant IVQuadrant IIIStrongCompetitivePositionRapid Market GrowthSlow Market Growth

1. Market development2. Market penetration3. Product development4. Forward integration5. Backward integration6. Horizontal integration7. Related diversification.

The Internal-External (IE) Matrix

The IFE Total Weighted ScoreThe EFE TotalWeighted Score

Strong3.0 to 4.0Average2.0 to 2.99Weak1.0 to 1.99

High3.0 to 3.99I

IIIII

Medium2.0 to 2.99IVIV

Ford Motor Company VI

Low1.0 to 1.99VIIVIIIIX

BCG Matrix

Relative Market Share

High 1.0 Medium .50 Low 0.0

High +20

Industry Sales Growth RatePercent

Stars

Question Marks

Medium 0

Low -20Cash CowsDogs

Quantitative Strategic Planning Matrix

Improve promotion on selected lower priced models with zero or very low rate financing to younger generation through Internet using Facebook, Twitter, and other networking channelsExpand into S. American and European countries by offering better incentives and financing

Key FactorsWeightASTASASTAS

Opportunities

1. The Big Three hope to gain further concessions from the United Auto Workers regarding labor costs0.0730.2140.28

2. The few consumers purchasing vehicles are doing so for practical reasons, with a focus on fuel efficiency, durability, and carmaker's sustainability0.0740.2820.14

3. According to CSM Worldwide light vehicle production exceeded the production of cars and trucks in North America and Europe by an estimated 16 percent and 14 percent, respectively0.0630.1840.24

4. In 2008, the Big Three began offering lowered interest rates or zero percent financing to lure buyers0.07------------

5. The auto industry has experienced a shift from trucks and SUVs to hybrid and small fuel-efficient vehicles0.06------------

6. Specialized car parts business/aftermarket0.06------------

7. Consumers/dealers willingness to improve brand/sales0.0730.2140.28

Threats

1. Due to global economic recession, consumer demand for new autos has plummeted0.0640.2430.18

2. Consumer confidence is the lowest in 40 years0.0720.1430.21

3. Unemployment rates exceed 10 percent in many areas in the United States and is expected to remain high for part of 20100.0720.1440.28

4. Unavailability of credit and high unemployment have pushed automakers to rethink methods of producing and selling cars0.0520.1040.2

5. Automakers have faced rising health care and pension costs0.0440.1620.08

6. The Big Three also suffer from an oversupply for dealers0.0710.0740.28

7. The government bailout money is diminishing, and Ford has exhausted its credit lines0.06------------

8. Consumers are concerned about voided Warranties if the Big Three go out of business 0.06------------

9. Many banks are just not making car loans0.06------------

TOTAL1.001.732.17

Strengths

1. Ford Credit Division operates globally0.08------------

2. Independent from Government bailout0.08------------

3. Vehicles marketed in 6 continents, over 200 countries 0.0720.1440.28

4. Ford has strong brand image and is considered an American icon0.083---4---

5. Strong consumer loyalty on their popular F-1500.08------------

6. Diverse vehicle lines give the company more flexibility to their customers to choose the desired car model0.0820.1630.24

7. Sales in S. America and European segments increased by US$3.5 billion from 2007 to 20080.0930.2740.36

Weaknesses

1. In one year, revenue decrease by approximately US$30 billion0.0940.3610.09

2. While the company's inventory was reduced from 2007 to 2008, the dealers are having higher inventory to sell 0.0820.1630.24

3. Current asset dropped by approximately US$18 billion from previous year0.1------------

4. Current liabilities increased by US$30 billion from previous year0.1------------

5. Operational costs typically higher in a company with multi-segment business0.07------------

SUBTOTAL1.001.091.21

SUM TOTAL ATTRACTIVENESS SCORE2.823.38

Recommendations

Expand sales in South American and European countries when the value of money is higher, economy is better and unemployment is lower and in the U.S. by promoting better pricing strategies, promotional campaign and offering more incentives.

EPS/EBIT Analysis

US$ Amount Needed: $80 millionStock Price: US$10.00Tax Rate: (0.4%) for 2008 and 31.1% for 2007Interest Rate: 6.5%# Shares Outstanding: 3.3 billion

Common Stock FinancingDebt Financing

RecessionNormalBoomRecessionNormalBoom

EBIT$300,000,000$600,000,000$1,000,000,000$300,000,000$600,000,000$1,000,000,000

Interest 0005,200,0005,200,0005,200,000

EBT300,000,000600,000,0001,000,000,000294,800,000594,800,000994,800,000

Taxes000000

EAT300,000,000600,000,0001,000,000,000294,800,000594,800,000994,800,000

# Shares3,301,464,3973,301,464,3973,301,464,3973,300,000,0003,300,000,0003,300,000,000

EPS0.090.180.300.090.180.30

70 Percent Stock - 30 Percent Debt70 Percent Debt - 30 Percent Stock

RecessionNormalBoomRecessionNormalBoom

EBIT$300,000,000$600,000,000$1,000,000,000$300,000,000$600,000,000$1,000,000,000

Interest 4,160,0004,160,0004,160,0001,040,0001,040,0001,040,000

EBT295,840,000595,840,000995,840,000298,960,000598,960,000998,960,000

Taxes000000

EAT295,840,000595,840,000995,840,000298,960,000598,960,000998,960,000

# Shares3,301,025,0783,301,025,0783,301,025,0783,300,439,3193,300,439,3193,300,439,319

EPS0.090.180.300.090.180.30

Source Note: Dr. Mernoush Banton