Ford’s Dilemma: Make Lincoln in China?
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Case Code: BSTR511 Case Length: 9 Pages Period: 2015-2016 Pub Date: 2017 Teaching Note: Not Available |
Price: Rs.300 Organization : Ford Motor Company Industry :Luxury Car Industry Countries : China Themes: Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In October 2016, global automobile producer Ford Motor Company (Ford) reported a 56% decline in net profit to US$957 million over the same quarter of the previous year. The company attributed the decline mainly to the slow demand in North America – one of its major markets – increased incentives, and a tough pricing environment. On the other hand, global sales of Ford’s luxury band – Lincoln – went up by 17% to 8,546 vehicles and the Asia Pacific delivered a record pre-tax profit worth US$131 million in 2016-Q3, up from US$109 million in 2015-Q3, largely due to the growing demand from China. In China, Ford had three joint ventures and these contributed US$302 million to pre-tax profit in 2016-Q3, US$67 million more than in the same quarter of the previous year. , Slowing growth in the US market and the continuous growth in China, especially for the Lincoln, made the Ford management give serious thought to producing Lincoln cars in China. Till early 2017, these cars were being produced in the US (at three locations), Canada (at one location), and Mexico (at one location) (Refer to Exhibit I). Interestingly, its US competitor General Motors (GM) was producing the Cadillac in China. Its German competitors were also producing their luxury (premium) vehicles in China, thereby saving on import taxes....
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