Ford Motor Company Term Paper

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ford Motor Company Analysis

Ford's History, Development and Growth

As Ford Motor Company itself proudly declares, "The dream became a business." The inception of Ford is one of the critical steps in the industrialization of America and the West in general. According to Ford's public relations department, "Ford Motor Company entered the business world on June 16, 1903, when Henry Ford and 11 business associates signed the company's articles of incorporation. With $28,000 in cash, the pioneering industrialists gave birth to what was to become one of the world's largest corporations. Few companies are as closely identified with the history and development of industry and society throughout the 20th century as Ford Motor Company." (www.ford.com)

As with most huge multinational corporations, Ford Motor Company's beginnings were humble. In fact, the car manufacturer suffered through many nervous moments in its infancy. The earliest record of a shipment is July 20, 1903, approximately one month after the company's actual incorporation, to a Detroit doctor. With the company's first sale came hope -- and indeed, a young Ford Motor Company had taken its first baby steps.

But assembly line mass production was Ford's greatest contribution to industrialization. First used at the Highland Park plant (in Michigan) in 1913, the new assembly line technique of manufacturing permitted individual workers to remain in one location and execute the same job over and over again on multiple vehicles that passed by them. The line proved tremendously efficient, helping the company far surpass the production levels of its competitors -- while at the same time rendering the automobiles more affordable. (www.ford.com)

According to Ford's public relations department, "Henry Ford insisted that the company's future lay in the production of affordable cars for a mass market. Beginning in 1903, the company began using the first 19 letters of the alphabet to name new cars. In 1908, the Model T. was born. 19 years and 15 million Model T's later, Ford Motor Company was a giant industrial complex that spanned the globe. In 1925, Ford Motor Company acquired the Lincoln Motor Company, thus branching out into luxury cars, and in the 1930's, the Mercury division was created to establish a division centered on mid-priced cars. Ford Motor Company was growing." (www.ford.com)

The 1950s presented the arrival of the heralded Thunderbird and the chance to own a part of the famed Ford Motor Company. The company went public and, on Feb. 24, 1956, had about 350,000 new stockholders. Henry Ford II's keen perception of political and economic trends in the 50's led to the global expansion of Ford in the 60's, and the establishment of Ford of Europe in 1967, 20 years ahead of the European Economic Community's arrival. The company established its North American Automotive Operations in 1971, consolidating U.S., Canadian, and Mexican operations more than two decades ahead of the North American Free Trade Agreement. (www.ford.com)

Indeed, Ford Motor Company began the 19th century with a single man -- Henry Ford -- envisioning goods that would meet the needs of people in a world on the verge of high-gear industrialization. Today, Ford Motor Company is a family of automotive brands consisting of: Ford, Lincoln, Mercury, Mazda, Jaguar, Land Rover, Aston Martin, and Volvo. According to Ford's public relations department, "The company is beginning its second century of existence with a worldwide organization that retains and expands Henry Ford's heritage by developing products that serve the varying and ever-changing needs of people in the global community." (www.ford.com)

Ford's Internal Strengths and Weaknesses

Ford's primary strength today is a reliable set of purchasers in an era where American automobile manufacturers are struggling. Ford's Crown Victoria Interceptor, for instance, holds about 85% of the police car market. (The Center for Auto Safety, 2005). As a result, Ford has a direct and reliable stream of accounts receivable on such contracts -- also, Ford does very well in the taxi cab and rental car purchasers' markets as well. Consequently, even when personal car purchasing rates decline with economic downturns, Ford is able to ride through those rough times with the much more stable police car, taxi cab and rental car industrial purchasers.

However, a strong weakness for ford has been recent revelations of compromises in safety. For instance, in the aforementioned police car market, recalls have been the norm recently: "Ford, which has about 85% of the police car market, came under fire last year after several cities and law enforcement agencies across the country filed lawsuits and voiced concerns about the risks of the Interceptor catching fire after high-speed, rear-end wrecks. In October 2002, Ford announced plans to begin installing rubber and plastic shields around the gas tanks of the nearly 350,000 Ford Crown Victoria police Interceptors. Ford estimated it would cost them about $50 million to furnish the shields aimed at preventing items from penetrating the fuel tank. At the same time, the automaker announced plans to offer an optional $250 trunk pack cabinet to safely store sharp-edged, heavy equipment used by police officers." (The Center for Auto Safety, 2005)

These safety issues were compounded, of course, by the Ford Explorer / Firestone tires partnership that inexorably damaged Ford's reputation in the late 1990s and early 2000s. The average consumer today believes Japanese competitors' cars to be both safer and more reliable than Ford's offerings, and this presents a serious challenge to Ford -- one that has translated to a weakness on the traditional SWOT analysis.

Also, where General Motors has survived the weakening of the American auto market and the transition to Japanese and German cars' popularity with sales overseas, Ford does not have nearly the presence overseas that General Motors holds. As a result, it is more vulnerable to the swinging tide towards foreign car purchases for the average American household.

The External Environment

The external pressures facing Ford in its core competency can be summed up in one word: oil. With the Bush administration's pursuit of several wars in the middle east and the promise of perhaps attacks on Syria and Iran, the price of oil has shot up to well over $3 a gallon in most American states.

This has pushed the American auto market decidedly towards hybrids and other electronic-based vehicles with lower gas dependencies.

Consequently, the external environment presents challenges to Ford's SWOT. In order to compete well into this century, Ford must produce more products such as its mid-level SUV hybrid, the Ford Escape. However, it cannot stop there. Lexis has just released a luxury hybrid SUV and Ford must follow suit. Like it or not, the SUV is the car of choice for the personal automobile market today, and with gas prices high, Ford must develop a luxury hybrid SUV because of these external pressures in the world's environment.

Also, Ford must focus more (pun intended) on expanding its operations overseas as General Motors has done. The General Motors Opel line of cars has met with unmitigated success in Europe and beyond, and Ford really has very little presence, for instance, in the world's fastest growing automobile market -- India.

Evaluate SWOT Analysis

Ford overall is in a decent position as it forges through the 21st century. This is indicated in the trends presented by financial analysts.

RECOMMENDATION TRENDS

Current Month

Last Month

Two Months Ago

Three Months Ago

Strong Buy

2

2

2

2

Buy

0

0

0

0

Hold

12

12

12

12

Sell

1

1

1

2

Strong Sell

2

2

2

0

(Yahoo Finance, 2005)

Here we see that in general, analysts recommend holding onto Ford stock, which is a strong indicator that the company is well positioned to continue to perform, if not overperform.

However, there are negative indicators as well:

UPGRADES & DOWNGRADES HISTORY

Research Firm

Action

20-Jul-05

KeyBanc Capital Mkts / McDonald

Downgrade

Underweight

Sell

20-Jun-05

Banc of America Sec

Upgrade

Sell

Neutral

17-Jun-05

KeyBanc Capital Mkts / McDonald

Downgrade

Hold

Underweight

16-Jun-05

Deutsche Securities

Upgrade

Sell

Hold

27-May-05

Goldman Sachs

Initiated

In-Line

11-Apr-05

Thomas Weisel

Downgrade

Outperform

Peer Perform

7-Apr-05

Smith Barney Citigroup

Downgrade

Buy

Hold

28-Feb-05

Banc of America Sec

Downgrade

Neutral

Sell

9-Nov-04

Smith Barney Citigroup

Initiated

Buy

17-May-04

Prudential

Downgrade

Neutral

Underweight

(Yahoo Finance, 2005)

Here, it is evident that the most recent changes in Ford's fortunes have been negative. Recently, analysts downgraded Ford to Sell from a height of Outperform. This is an indicator that Ford, though perhaps strongly positioned for the 21st century, is also in danger of struggling as a result of its SWOT.

Analyze Corporate Level Strategy

Ford's strategy is to offer automobiles in every single price range and for every use. From trucks to SUVs to compact cars to hybrids, Ford wants to expand its footprint. It does not focus on one particular type of vehicle like, for instance, its subsidiary Aston Martin. In fact it uses such subsidiaries to explores markets its core company -- Ford Motor Company -- cannot explore because of branding and engineering rationales.

Branding is key to American automakers. General Motors, for…[continue]

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