Ford Motor Company: Implementing the 'One Ford' Strategy
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Case Code: BSTR423 Case Length: 18 Pages Period: 2006-2012 Pub Date: 2013 Teaching Note: Not Available |
Price: Rs.500 Organization: Ford Motor Company Industry: Automotive Countries: US; Global Themes: Implementation, Restructuring, Globalization |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
The 1990s
The early 1990s was a tough period for Ford, as it was for the rest of the auto industry. In 1991, Ford's worldwide automotive operations incurred a loss of $3.2 billion. The company's automotive losses in the US alone amounted to $2.3 billion . This was a significant blow to the company and quite unexpected too as it was only in 1989 that it had earned $3.3 billion in net income. However, the silver lining for Ford was that it had accumulated around $115 billion in banking-related assets. The financial figures for 1991 would have looked a lot worse if the company had not diversified into the financial services sector. For the year, Ford's financial services group recorded $927 million in earnings...
The Early 2000s
In the early part of the 21st century, Ford took several steps with the aim of strengthening its competitiveness. It spun off its Visteon unit, acquired BMW's Land Rover SUV business, and upped its stake in Hertz . However, one unexpected event was to adversely impact its financial health - the recall of over 6.5 million Firestone brand tires. These tires were used as original equipment on the Ford Explorer, the Mercury Mountaineer, the Ranger, and some of its F-150 pickups. In what was then the largest recall in automotive history, Ford was compelled to call back over 300,000 vehicles and replace over 13 million Firestone tires at a cost of $3.5 billion . In 2001, the company incurred a loss of $5.45 billion. Nasser was asked to step down late that year, leaving William Clay Ford, Jr., in charge. Amid cut-throat competition, sluggish sales, low employee morale, and quality issues, Ford Jr. had his work cut out to revive the company...
The 'One Ford' Strategy
In September 2006, Alan Mulally was appointed CEO of Ford. Soon after, he unveiled the 'One Ford' strategy in an effort to stimulate growth.
The first component of the 'One Ford' strategy concerned people. It recognized the importance of a skilled and motivated workforce working together as a team. The company planned to develop a winning team by putting in place the principles and practices that would unlock the full potential of its employees...
Implementing the Strategy
Ford set out to implement the 'One Ford' strategy. Its initial focus was on securing financing as this was vital for the restructuring efforts.
In December 2006, Ford secured $23.5 billion of new liquidity. In addition, the company obtained a convertible debt of $4.95 billion, a secured term loan of $7 billion, and a secured revolving credit facility of $11.5 billion. This amounted to total automotive liquidity of about $46 billion at year-end 2006...
The Results
In 2009, Ford recorded a pre-tax operating profit of $454 million and a net income of $2.7 billion. This was the first time since 2005 that Ford had posted a full-year positive net income. In 2009, Ford's market share in the US increased to 15.3 percent, an increase of 1 percent compared to 2008. Ford's market share in Europe went up to 9.1 percent, a half point increase compared to the previous year; this was the highest in 11 years. And in China, Ford sales were up 45 percent although it continued to be a minor player in the region...
Challenges
Implementing the One Ford strategy was not without its share of challenges. Mulally knew that Ford's culture would pose a significant challenge in the implementation of the strategy. With time, Ford's culture had become bureaucratic and corrosive, with internal politics ruling the roost and personal advancement taking precedence over the company's interests. Also, Ford's divisions operated independently; this resulted in silos, where employees in one division had little or no interaction with employees of other divisions. Mulally started to break down the silos and change the way people worked, integrating the different regions. Under him, Ford also became a more open and collaborative place, a change from its previous culture of "empire building and back-biting". However, although Ford's US operations were able to make major improvements, Ford Europe continued to struggle...
The Road Ahead
The "Great Recession" of 2007-09 had a major impact on the global automobile industry, with demand, especially in developed markets, stagnating or sinking. While the economic outlook seemed to have improved since then, there was uncertainty regarding the financial market environment, analysts said. The labor markets in several countries continued to remain weak. Also, the continuing tightness in the credit markets didn't bode well for sustained growth. All this indicated that the demand for cars would remain low, especially in the developed markets...
Exhibits
Exhibit I: Plant Closure Announcements Made as Part of the 'Way Forward' Plan
Exhibit II: Ford's Global Product Strategy
Exhibit III: ACH Plant Closures
Exhibit IV: Employment Data At Ford's Worldwide Operations Between 2005 And 2011
Exhibit V: New or Upgraded Product Launches
Exhibit VI: The Blue Oval
Exhibit VII: About Premier Automotive Group (PAG)
Exhibit VIII: Financial Highlights between 2005 and 2011
Exhibit IX: Ford's Share Price between Oct' 2005 and Oct' 2008
Exhibit X(A): Market Shares of Major Players in the Chinese Automobile Market between 2009 And 2011
Exhibit X(B): Market Shares Of Major Players in the Indian Passenger Auto Market between 2009 And 2012
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