Ford Motor Company's Strategy to Avoid Bailouts

Introduction: Ford's Leadership History and Challenges

At Ford Motor Company, one of the biggest challenges has been adapting to changes within the sector. This is because there is a history of infighting and disputes over who will run the company after shifts in leadership. These issues date back to 1945, when Henry Ford II had to fire Harry Bennett in order to take over for his ailing father. Then, in 1979, similar tensions resurfaced when Henry Ford II fired Lee Iacocca, a significant move given that Iacocca was the innovator behind the Mustang and Lincoln's turnaround. Ten years later, the situation became even more problematic when Don Peterson was forced out after publicly claiming he planned to "repot" himself. The final major chapter in these challenges occurred in 2001 when Bill Ford was forced to fire Jac Nasser as CEO, following months of public disputes between the two. (Belcourt, 2013) (Taylor, 2013)

During the last nine years, however, the firm has been remarkably stable under Alan Mulally, who came over from Boeing. He rebranded the organization and helped Ford achieve a turnaround during one of the worst economic environments since the end of World War II. The effects of his leadership were substantial: the company did not require any assistance from the federal government to avoid bankruptcy. Instead, Mulally created a plan that allowed the firm to reduce its debt levels and liabilities, enabling it to restructure and offer vehicles most in demand—particularly those in the fuel economy class. These changes required the entire organization to transform its thought process and incorporate innovative thinking into the way its vehicles are manufactured. (Belcourt, 2013) (Taylor, 2013)

The result is that Ford's business model and balance sheets have evolved to reflect these strategic changes. This helped the company avoid needing government bailouts during the Financial Crisis. To fully understand what happened requires examining the core issue, the financial strategy employed, the impact of corporate governance, and evaluating whether Ford was truly successful. Together, these elements illustrate how the firm was able to adjust to these challenges and remain solvent during the crisis.

Over the decades, the automotive industry has continued to evolve as stakeholders demand improvements to product safety and technology. These areas are designed to enhance efficiency and ensure vehicles have the most in-demand products and services. However, manufacturers unable to keep pace with these expectations face tremendous challenges associated with loss of market share and clientele. As a result, manufacturers must continually innovate in order to remain competitive.

Background and Industry Dynamics

According to Xia (2011), there are several factors directly impacting the competitive position of producers: cease, control, and combine. These concepts focus on how a firm can stop manufacturing outdated models, control the marketplace effectively, and combine operations strategically. Those able to do this will be more flexible in adjusting to stakeholder needs. (Xia, 2011)

Ford faces a unique crossroads, as the company must learn to adapt and evolve within this challenging environment. Their ability to avoid bailouts is a testament to the strategies being utilized and their potential long-term effects. However, a major ongoing challenge is the need to continue adapting and evolving, which requires strong leadership and a clear vision of the future.

The auto industry currently faces tremendous challenges including plunging demand due to economic downturn, concerning trends in technology development, and fierce global competition. Analysis of management theories, information from managers at different levels of the auto industry's supply chain, and novel theoretical models of sustainability in supply chain management reveal that the current strategy of outsourcing to low-cost countries is not only unsustainable but also irresponsible for both the industry and society. A "triple-C" remedy—cease, control, combine—has been proposed for the auto industry to reduce inventory and enhance supply chain management. This proposed strategy would save the industry money in research and development investment, reduce quality costs and inventory waste, help the industry navigate volatile economies, and achieve sustainable development. With close relationships and strong support from suppliers, the industry can accelerate technology development, introduce new fuel-efficient models quickly, and become less dependent on fluctuating gas prices. Finally, it will help the industry retain existing jobs and generate new employment in the United States, activities that lead to public support and restored corporate image.

To make matters more complicated, Mulally has announced that he will step down as CEO in the near future. His replacement is raising concerns that the company could experience similar leadership conflicts when power changes hands. There are worries that the new CEO could have an adversarial relationship with employees, the Ford family, or the Board of Directors. If this were to happen, the firm would lose any strategic advantages it gained under Mulally.

This challenge has occurred within many of the strongest companies facing similar transitions. A notable example is Jack Welch stepping down as CEO of General Electric in 2001. At the time, he was regarded as one of the best CEOs the firm ever had and played an integral part in selecting his successor, Jeffrey Immelt. However, this did not help GE expand at the same pace it had under Welch. Instead, the firm experienced a series of canceled mergers, unprofitable divisions that hurt revenues, and slower growth. These factors meant that the stock price would stagnate during Immelt's tenure. (Belcourt, 2013) (Taylor, 2013)

This is a classic example of leadership succession challenges, even when an effective strategy for selecting the next CEO is in place. In Ford's case, succession plans in the past have often failed. To avoid similar issues requires understanding the company's strengths and weaknesses, along with suggestions for improving effectiveness. These elements will offer specific insights to adjust the plan and increase the chances of successful transition.

Ford can address these challenges by developing a social media strategy combined with collaborative selling. Collaborative selling involves working with the customer to understand how a specific product or service is useful to them. According to Barrera (2006), in these situations the individual will examine how a product can achieve the client's objectives, what benefits it provides, and if it is worth the investment. Rather than persuading the customer to buy, this approach concentrates on matching the product to their needs and allowing them to make the best choices for their situation. This technique is valuable in identifying and addressing customer needs subtly. (Barrera, 2006)

Financial Crisis Response and Strategy

Social media has evolved significantly over the last decade, using sites such as Facebook, LinkedIn, blogging, article writing, and forums to connect with customers. The basic idea is to create topics of interest geared toward individuals with whom the seller has forged a relationship, offering useful advice and directing them to resources for further learning. The primary strategy is to increase the odds of closing more customers by reaching out using a modified form of mass marketing. Over time, firm sales rise by reaching enough people who share similar views and interests. These insights are important because they show how Ford must utilize these factors to understand customers. When this happens, the company can quickly adjust to changes in the industry and be first to offer vehicles most in demand. (Belew, 2014)

The basic strengths of Ford's response plan were to promote Mark Fields as CEO after Alan stepped down, given that Mark had worked with Alan from the beginning and played an integral part in Ford's turnaround. At the same time, the management team would continue to remain in place. These factors are important because they ensure that key members will be positioned appropriately when the transition occurs. (Belcourt, 2013) (Taylor, 2013)

Moreover, Ford has lower amounts of debt and a better brand name than its domestic competitors. These variables help the firm be seen as the strongest of the US automakers, giving customers confidence that management is focused on providing what they demand while ensuring the organization remains economically viable. This helps Ford maintain its competitive position through a business model that is more flexible and capable of evolving with new challenges in the future. (Belcourt, 2013) (Taylor, 2013)

Leadership Succession and Organizational Challenges

The combination of these factors enabled Ford to reach out to customers in markets where they had lost tremendous sales to overseas competitors, such as the Southeastern United States and East Coast. These strengths allowed the firm to be more flexible during times of severe economic distress in 2008 and 2009. Since that time, they have helped the firm achieve a complete turnaround and post the fourth consecutive year of profit growth. These improvements were the direct result of everyone's effort and focus on meeting the larger objectives of the organization. (Belcourt, 2013) (Taylor, 2013)

The weaknesses of the current model involve Mulally playing a direct role in selecting his successor. In many cases, when the CEO has input in this process, there is often a certain amount of bias and emotionalism involved. This occurs because the organization is running well and the firm wants to continue with its current strategy. The problem is that potential successors selected this way may have no vision about how to lead the company forward. Instead, they may be competent managers with an inability to understand and adapt to changes within the industry—a capability that is key to the firm's survival. Otherwise, there is the possibility that Ford could repeat its troubled past, involving infighting and animosity that nearly drove the firm into bankruptcy. (Belcourt, 2013) (Taylor, 2013)

Chrysler has experienced similar situations since the early 1980s. When Lee Iacocca was CEO, he helped the firm turnaround from the verge of bankruptcy. In the 1990s, he helped select his management successor. The result was that Chrysler made a series of missteps that ultimately led to the firm's bankruptcy in 2009. (Belcourt, 2013) (Taylor, 2013) (Iacocca, 2007)

Ford is at a similar crossroads, having avoided bankruptcy in 2008 and not required a government bailout. However, the firm now faces challenges including continuing losses of market share to foreign competitors, glitches in some new models, losses in the European division, and unsuccessful product launches. These variables require someone who has the flexibility and vision to lead the company forward. (Belcourt, 2013) (Taylor, 2013) (Iacocca, 2007)

The best way to improve the succession model is to have more transparency and openness. This can be achieved by creating a committee to select the next CEO, with members consisting of employees, shareholders, managers, auto industry executives, and community officials. They would have the responsibility of interviewing and picking someone who can lead the company forward. If this kind of focus were taken, more objectivity would be utilized to identify the ideal person, reducing the chances of selecting someone who does not understand the challenges impacting the firm and is incapable of evolving with them. (Belcourt, 2013) (Taylor, 2013) (Iacocca, 2007)

Recommendations for Sustainable Success

To support the committee-based succession approach, several motivational and organizational theories are relevant. Maslow's Hierarchy of Needs focuses on psychological, security, social, esteem, and self-actualization needs. The theory emphasizes deprivation and growth, with deprivation occurring at the lower ends of the spectrum. Growth takes place when basic needs are met and the individual seeks something to help them feel more fulfilled. Addressing the most basic requirements will lead to individuals wanting a sense of accomplishment in their lives. ("Want to Motivate People," 2010)

Herzberg's Theory of Motivation concentrates on two areas: hygiene and motivation factors. Hygiene represents the most basic level of motivation by addressing fundamental requirements, while motivation seeks greater empowerment. This is similar to Maslow's theory in showing how basic needs must be met for greater empowerment levels. However, it differs from Maslow's concepts by providing more levels to experience for greater fulfillment. ("Herzberg's Theory of Motivation," 2010)

Pink (2009) argues that rewards and punishments for specific behavior are ineffective because people want greater satisfaction from their work and higher levels of personal empowerment. His Third Drive Theory determines that human beings are motivated to do more when they have a sense of learning without the punishment-reward system in place. This results in better performance and quicker task completion. Intrinsic motivation occurs from a natural desire to learn. Autonomy is the independence to complete tasks without pressure from others. Mastery is the individual's ability to complete tasks and elevate their learning to another level. Purpose occurs when the person feels that what they are doing counts and makes a difference. ("Dan Pink: The Puzzle of Motivation," 2009)

These factors impact job satisfaction and organizational commitment. Job satisfaction occurs when an employee has positive or negative attitudes related to their work. Organizational commitment occurs after an individual feels respect, fairness, and is willing to go the extra mile for the firm. These factors are interconnected, as both have direct impact on the person's outlook, motivation levels, and whether they will do more for their employer. (Akanbi, 2013)

However, they differ in that job satisfaction is one step toward helping a person feel committed to the organization. The two build off each other and are necessary for establishing the strongest beliefs. These factors work in stages and continue to evolve as individuals use various thoughts and emotions to determine satisfaction with their work and position. Once someone has established favorable views, this is the point where they become more dedicated to the company long-term, willing to help the organization achieve key objectives and utilizing their talents to enhance performance. (Akanbi, 2013)

Conclusion

These objectives can be achieved by bringing employees and managers together in the form of a committee that evaluates shifts in the industry and encourages the company to embrace certain practices. The basic idea is to protect the reputation and brand image of the firm while understanding variables that could negatively affect it going forward. ("Want to Motivate People," 2010)