General Motors Vs Ford

General Motors

VS

Ford

Michael Elorreaga Organizational Analysis

Introduction: Doing this organizational analysis, I wanted to further my knowledge about the car industry. The first prospect that came to mind was General Motors. I picked General Motors because of its popularity in the United States. I had some interesting general knowledge of the company like the dependability and quality of their cars.

Some

comments were, “I rather have a Chevy Truck than a Ford” and “The general motors cars are more dependable than Ford.” These comments made it clear that I liked the General Motors auto line of cars. Then, I asked myself what would be a cooperate company just as enormous. I came to a conclusion that Ford would be the other company. Though Ford has a nice line of cars, I had some negative thoughts about the company. Acronyms were said such as, “Found On Road Dead” or “Fix Or Repair Daily.” Each of those sayings had put a dent in my thoughts that I would not buy a Ford, not solely on those sayings, but also because of the influence of my parents and other such adverse publicity. These companies have a long-standing tradition in the U.S as manufacturing giants in the automobile industry, since they began here. With these two cooperate giants, I can evaluate and compare both companies financially. My over all preference

was to buy the General Motors line of cars; in doing this project I wanted to know if by researching each company if I would change my mind. Also, this will enable me to draw a conclusion on which company would be a better investment and which company is doing better as a whole.

General Motors History Founded in 1908, GM today sells its vehicles in about 200 countries. The company has manufacturing operations in more than 30 countries. General Motors (NYSE: GM), the world's largest vehicle manufacturer, designs, builds and markets cars and trucks worldwide. In 2000, GM earned $5 billion on sales of $183.3 billion, excluding special items. It employs about 363,000 people globally. GM also operates one of the largest and most successful financial services companies, GMAC, which offers automotive, mortgage and business financing and insurance services to customers worldwide. In 2000, GM sold about 8.6 million cars and trucks - more than any other automaker and 15.1 percent of the world vehicle market. GM's major markets are North America, Europe, Asia-Pacific, Latin America, Africa and the Middle East. Its largest market is North America, where it is in its 74th year as the market leader. GM is expanding and coordinating the company's innovative initiatives into electronic commerce with the goal of transforming its traditional automotive operations into a leading global e-business enterprise. GM is utilizing new technologies to enhance the customer experience and improve efficiency. GM is the industry-leading in-vehicle communications and information service. It provides motorists with personalized assistance, emergency aid, and hands-free, voiceactivated access to Internet-based information and content services including news and weather, e-mail and stock quotes. The new Personal Calling service provides hands-free, voice-activated, in-vehicle cellular phone access.

GM's Hughes Electronics subsidiary is well on its way to becoming the world's premier provider of integrated digital entertainment and information services and products. DirecTV achieved its strongest annual growth in history, grossing 3.4 million new subscribers in 2000. This year's new television/Internet product and service introductions will further strengthen the growth of Hughes Electronics.

FORD’S History Ford Motor Company entered the business world without fanfare on June 17, 1903, when Henry Ford and 11 associates filed incorporation papers in the state of Michigan. With an abundance of faith but only $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 America throughout the 20th century as Ford Motor Company, and perhaps no other American firm is as well known around the globe. From this small beginning grew a global network of manufacturing and assembly plants, sales operations, parts depots and dealers, with Ford Motor Company represented in more than 200 nations and territories spanning six continents. Today, Ford Motor Company is the world's largest producer of trucks and the second-largest producer of cars. The company has operations in more than 30 countries, and employs more than 340,000 men and women at its factories, laboratories and offices around the world. As with most great enterprises, Ford Motor Company's beginnings were modest. The company had anxious moments in its infancy, balancing precariously on the brink of bankruptcy until cash inflows from sales began. The earliest record of a shipment is July

20, 1903, approximately one month after incorporation, to a Detroit physician. With the company's first sale came hope. A worried group of stockholders, warily eyeing a bank balance that had dwindled to $223.65, breathed more easily, and a young Ford Motor Company had taken its first sure steps. In 1988, Ford Motor Company made a strategic decision to develop a new global car. Engineers in Europe, the United States, and other design and development centers were already increasingly combining their resources on existing programs with significant results. The similarities between the various world markets also were growing, as legislation reached new levels of harmony and car buyers on different continents found their product tastes and motoring needs were less different than they had been in the past. Ford Motor Company is ranked second on the Fortune 500 list of the largest U.S. industrial corporations, based on sales. In 1998, worldwide sales and revenues totaled $142.6 billion. Net income, excluding one-time items, was $6.5 billion. Although Ford Motor Company is best known as a manufacturer of cars and trucks; it produces other products, including industrial engines, glass, plastics, and a wide range of automotive components. Ford also is established in many other businesses-including financial services, automotive replacement parts, and electronics. In 1997, the company created Visteon, a wholly owned enterprise of Ford Motor Company, to explore and expand the market for components around the world. Ford Motor Company is committed to fully utilizing the rich diversity of its human resources. Company leadership believes that diversity will be the engine that powers the creative energy of corporations of the 21st century. Successful companies will

be those that are able to draw on the diverse talents of their people to stay on the innovative and competitive edges of their fields Ford Motor Company started this century, with a single man envisioning products that would meet the needs of people in a world on the verge of high-gear industrialization. The company is ending the century 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.

Financial Reports General Motors: Looking at the Balance sheet of General Motors from their 2000 financial statement in relation to 1999, the statistics are higher in 2000 than they are to 1999. In the Balance Sheet, I looked at the assets. The total assets in 2000 are 303,100(in millions) when comparing to 1999, which are 274,730 (in millions), their assets went up in 2000 compared to 1999 by 28,370(in millions). This is a sufficient increase and a good increase for GM. There are some plus and minus in the balance sheet. Some of their positives in their assets were the other assets in 2000 had 32,243(in millions) compared to 1999, which had 25,358(in millions). This is an increase of 6,885(in millions). Another significant increase is in financial receivable which in 2000 they received 92,415(in millions) compared to 1999 which had 80,627(in millions). This was a big increase of 11,788(in millions). The negatives of their assets of 2000 compared to 1999 were the deferred income taxes and other current assets, which 2000

had 8,388(in millions) to 1999, which had 9,006(in millions). The difference of the two is $618(in millions) dollars. The other negative was the Intangible assets in 2000 they had 7,622(in millions) and 1999 had 8,527(in millions). This was a decrease of $905 dollars (in millions). Looking at the positive and negatives of the Liabilities are also significant. Viewing the positives we can see that in the Liabilities one significant positive is the Total Financing and Insurance Operations liabilities. In 2000 they had 155,375 (in millions) compared to 1999, which had 137,826(in millions). This was an increase of 7,549(in millions). The only negative aspect in the Liabilities is in their Automotive at el., which in 2000 they had 15,768 (in millions) compared to 1999, which had 17,426(in millions). This is a decrease of 1,658(in millions). Viewing the positive and negatives of the Stockholder’s Equity are also significant.

Viewing the positive aspect we can see in the increase in the Total

Stockholder’s equity. In 2000 they had 30,175(in millions) compared to1999, which had 20,644(in millions). This was an increase of 9,531(in millions). The negative aspect is in the Accumulated foreign currency translation adjustments. In 2000 they had 2,502(in millions) compared to 1999, which had 2,033(in millions). This is a decrease of 169(in millions). Looking at all these aspects of the Balance Sheet, General Motors is doing better compared to 1999. This is a good aspect in deciding which company is better. Ford is also has some positive aspects of their Balance Sheet.

Ford

Looking at the balance sheet of Ford Motor Company from their 2000 financial statements in relation to 1999, the statistics are higher in the assets phase. In 2000 the total assets was 284,241 millions compared to 1999 which was 270,249. The major increase for 2000 was the finance receivables by 11,866 millions. I felt that this was a major impact concerning how the balance sheet was configured. A negative aspect of the balance sheet was the company loss major amounts of money in Marketable Securities and total Current Assets. Moving on to the Liabilities, the Total Financial Services Liabilities in 2000 were 176,557, which was elevated from 1999 statistics. The 1999 Total Financial Service Liabilities was 159,626. The difference between this is 16,931 millions. The major contributions to the 2000 Liabilities were the Accrued Liabilities, Debt and Total Current Liabilities. The stockholder’s Equity losses were 8,994 million in 2000. The reason the Stock Holder’s Equity is low in 2000 is because of the Earnings Retained for the use in businesses. The Total liabilities and stockholders’ equity had an amount of 284,421 million, which was higher than the 1999 amount of 270,249 million. On the total balance at the end of the year of 1999 was 27,604 million. Dividends for that year were 2,290 million. In comparing this to 2000 the end of the year’s total balance was 18,610 million and the dividends was 2,751 million. Reason being, that in 1999 they had a large amount of capital stock. The end of the year’s capital stock in 1999 was 1,222 million. While achieving low standards in 2000, capital stock was 19 thousands.

Which is Better GM or Ford??? Comparison

While comparing which company would be a better investment and a better buy for the consumer I see that General Motors is still my pick after evaluating the Balance Sheet. The Balance Sheet is a financial statement that summarizes the assets, liabilities, and owners’ equity at a specific point in time. In General Motors the Balance Sheet shows that the total Assets and total Stock Holder’s Equity was higher than Ford’s. Ford’s total Assets all increased around fourteen million, while GM Total assets increased around 26 million. As far as looking at total Stockholder Equity between GM and Ford, Ford decreased by ten million and GM increased by ten million. One of the positive aspects from GM balance sheet is, productivity increase every year. On the other hand Ford is not having a significant increase in product. In discussing the comparison of General Motors and Ford I found out the best way to compare them also was by ratios. There are three ways to classify these are (1)Liquidity analysis, (2)solvency analysis, and (3)profitability analysis. “Liquidity is a relative measure of the nearness to cash of the assets and liabilities of a company. Nearness to cash deals with the length of time before cash is realized. Various ratios are used to measure liquidity, and they basically concern the company’s ability to pay it’s debts as they come due” (Porter, Norton, Chapter13,p.626).

“Solvency refers to a

company’s ability to remain in business over the long term…solvency concerns the ability of the firm to stay financially healthy over the period of time that existing debt(short and long term) will be outstanding” (Porter, Norton, Chapter13,p.631). “Profitability indicate how well management is using the resources at its disposal to earn

a return on the funds invested by various groups.

Two frequent used profitability

measures, the gross profit ratio and the profit margin ratio” (Porter, Norton, Chapter13,p.634). In the Liquidity Analysis of GM and Ford, Ford overall has better quality because looking at the number of days’ sales in inventory Ford has a 21.8 compared to GM 27.4. It takes Ford 22 days to sell their inventory compared to GM 27 days. In the Cash to Cash Operating Cycle, which means, the length of time from the purchase of inventory to the collection of any receivable from the sale. It takes Ford 34 days compared to GM 39 days. In the Solvency Analysis, which is the ability of a company to remain in business over the long term, in comparing Ford’s Solvency Analysis to GM’s, we found that Ford’s debt to Equity Ratio, which was 2.33, was lower than GM’s ,which was 5.15, by 2.82. this means that the total Liabilities to total stockholder’s equity in Ford is lower than GM. For more information of GM and Ford’s. In the Profitability Analysis, which is how well management is using company resources to earn a return on the funds invested by various groups, in comparing Ford’s analysis to GM’s, we found that

In conclusion I would chose General Motors over

Ford, after evaluating this comparison

Bibliography

1.

1.

Porter, Norton, Financial Accounting, The Impact on Decision Makers,

Harcourt College Publishers, 301 Commerce Street, Suite 3700, Fort Worth, TX 76102, pp. 621-636. 2.

2.

Internet Sites of Ford and General Motors.