Naseem Final

FORD MOTORS: The Ford Motor Company (NYSE: F) is an American multinational corporation and the world's fourth largest automaker based on worldwide vehicle sales, following Toyota, General Motors, and Volkswagen. Based in Dearborn, Michigan, a suburb of Detroit, the automaker was founded by Henry Ford and incorporated on June 16, 1903. In addition to the Ford, Lincoln, and Mercury brands, Ford also owns Volvo Cars of Sweden, and a small stake in Mazda of Japan and Aston Martin of England. Ford's former UK subsidiaries Jaguar and Land Rover were sold to Tata Motors of India in March 2008. In 2007, Ford fell from the second-ranked automaker to the third-ranked automaker in US sales for the first time in 56 years, behind General Motors and Toyota. Based on 2007 global sales, Ford fell to the fourthranked spot behind Volkswagen. Ford is the seventh-ranked overall American-based company in the 2007 Fortune 500 list, based on global revenues in 2007 of $172.5 billion. In 2007, Ford produced 6.553 million automobiles and employed about 245,000 employees at around 100 plants and facilities worldwide. Also in 2007, Ford received more initial quality survey awards from J. D. Power and Associates than any other automaker. Five of Ford's vehicles ranked at the top of their categories and fourteen vehicles ranked in the top three. Ford introduced methods for large-scale manufacturing of cars and large-scale management of an industrial workforce using elaborately engineered manufacturing sequences typified by moving assembly lines. Henry Ford's methods came to be known around the world as Fordism by 1914.

History of Ford Motor Company: Ford was launched in a converted factory in 1903 with $28,000 in cash from twelve investors, most notably John and Horace Dodge (who would later found their own car company). During its early years, the company produced just a few cars a day at its factory on Mack Avenue in Detroit, Michigan. Groups of two or three men worked on each car from components made to order by other companies. Henry Ford was 40 years old when he founded the Ford Motor Company, which would go on to become one of the world's largest and most profitable companies, as well as being one to survive the reat Depression. As one of

the largest family-controlled companies in the world, the Ford Motor Company has been in continuous family control for over 100 years.

MISSION, GOAL AND STRATEGY: Goal: Our vision is to become the worlds leading consumer company for automotive products and services.

Mission: We are a global family with a proud heritage, passionately committed to providing personal mobility for people around the world. We anticipate consumer needs and deliver outstanding products and services that improve peoples lives.

Strategy: The customer is Job #1. We do the right thing for our customers, our people, our environment and our society. By improving everything we do, we provide superior returns to our shareholders.

THREE KEY SUCCESS FACTORS:

 Technology

– Improving the driving experience: doing things such as equipping cars with televisions, terrain response technology for smoother driving, and voice recognition to control many functions, including navigation, phone, entertainment, climate control, the retractable roof, and personalization preferences.

 Safety

–Protecting you and your family: Rollover protection and innovative restraint systems keep you safer in the event of an accident.

 Design

Ford believes that cars should not only be safe and technologically sound, but also nice to look at, for this reason Ford is constantly make new and innovative car models such as the new Focus ST, and Land Rovers new Range Stormer.

THREE KEY WEAKNESSES:  Outsourcing

-Because of outsourcing while Ford is increasing productivity and cutting cost, they are also firing a lot of their

employees some of which have been there for years. So because of this Fords employee loyalty is decreasing.

 Quality - Though they have safe and innovative designs Ford has a reputation of making cars with poor quality. Since Ford makes their cars with the intentions of cutting costs they don’t often use the most expensive parts, as a result their vehicles do not last as long as their competitors overseas.

 Customer

loyalty - Because of the expendable manner in which Ford treats their employees, customers often label Ford as an “unappreciative” company, which lessons the Brand loyalty of the company.

BRANDS AND MARQUES: Today, Ford Motor Company manufactures automobiles under several names including Lincoln and Mercury in the United States. In 1958, Ford introduced a new marque, the Edsel, but poor sales led to its discontinuation in 1960. Later, in 1985, the Merkur brand was introduced to market Fords from Europe in the United States; it met a similar fate in 1989. Ford has major manufacturing operations in Canada, Mexico, the United Kingdom, Germany, Turkey, Brazil, Argentina, Australia, the People's Republic of China, and several other countries, including South Africa where, following divestment during apartheid, it once again has a wholly owned subsidiary. Ford also has a cooperative agreement with Russian automaker GAZ. Ford sold the United Kingdom-based Jaguar and Land Rover companies and brands to Tata Motors of India in March 2008. Also in 2008, Ford Motor is in negotiations with Shanghai Automotive Industry Corporation to sell its Volvo cars division.

Overall the Ford Motor Company controls the following operational car marques: Ford, Lincoln, Mercury, and Volvo Cars.

RECENT COMPANY DEVELOPMENTS: During the mid to late 1990s, Ford sold large numbers of vehicles, in a booming American economy with soaring stock market and low fuel prices. With the dawn of the new century, legacy healthcare costs, higher fuel prices, and a faltering economy led to falling market shares, declining sales, and sliding profit margins. Most of the corporate profits came from financing consumer automobile loans through Ford Motor Credit Company. By 2005, corporate bond rating agencies had downgraded the bonds of both Ford and GM to junk status, citing high U.S. health care costs for an aging workforce, soaring gasoline prices, eroding market share, and dependence on declining SUV sales for revenues. Profit margins decreased on large vehicles due to increased "incentives" (in the form of rebates or low interest financing) to offset declining demand. In December 2006, the company raised its borrowing capacity to about $25 billion, placing substantially all corporate assets as collateral to secure the line of credit. Chairman Bill Ford has stated that "bankruptcy is not an option".In order to control its skyrocketing labor costs (the most expensive in the world), the company and the United Auto Workers, representing approximately 46,000 hourly workers in North America, agreed to a historic contract settlement in November 2007 giving the company a substantial break in terms of its ongoing retiree health care costs and other economic issues. The agreement includes the establishment of a company-funded, independently-run Voluntary Employee Beneficiary Association (more commonly known as a VEBA) trust to shift the burden of retiree health care from the company's books, thereby improving its balance sheet. However, this arrangement will not begin to take effect until January 1, 2010. The agreement also gives hourly workers the job security they were seeking by having the company commit to substantial investments in most of its factories. The automaker reported 2006 of $12.7 billion, profitability until 2009. second quarter of 2007

the largest annual loss in company history in and estimated that it would not return to However, Ford surprised Wall Street in the by posting a $750 million profit. Despite the

gains, the company finished the year with a $2.7 billion loss, largely attributed to finance restructuring at Volvo. In June 2, 2008, Ford sold its Jaguar and Land Rover operations to Tata Motors for $2.3 billion. In January 2008, Ford launched a website listing the ten Built Ford Tough rules as well as a series of webisodes that parodied the show COPS (TV Series). During November 2008, Ford, together with Chrysler and General Motors, sought financial aid at Congressional hearings in Washington D.C. in the face of worsening conditions caused by the automotive industry crisis. The three companies presented action plans for the sustainability of the industry. The Detroit based automakers were unsuccessful at obtaining assistance through Congressional legislation. GM and Chrysler later received assistance through the Executive Branch from the T.A.R.P. funding provisions. On December 19, the cost of credit default swaps to insure the debt of Ford was 68 percent the sum insured for five years in addition to annual payments of 5 percent. That means it costs $6.8 million paid upfront to insure $10 million in debt, in addition to payments of $500,000 per year. In January 2009, Ford announced a $14.6 billion loss in the preceding year, making 2008 its worst year in history. Still, the company claimed to have sufficient liquidity to fund its business plans and thus, did not ask for government aid.

"THE WAY FORWARD" In the latter half of 2005, Chairman Bill Ford asked newly-appointed Ford Americas Division President Mark Fields to develop a plan to return the company to profitability. Fields previewed the Plan, dubbed The Way Forward, at the December 7, 2005 board meeting of the company; and it was unveiled to the public on January 23, 2006. "The Way Forward" includes resizing the company to match current market realities, dropping some unprofitable and inefficient models, consolidating production lines, and shutting fourteen factories and cutting 30,000 jobs. These cutbacks are consistent with Ford's roughly 25% decline in U.S. automotive market share since the mid-late 1990s. Ford's target is to become profitable again in 2009, a year later than projected. Ford's realignment also includes the sale of its wholly owned subsidiary, Hertz Rent-a-Car to a private equity group for $15 billion in cash and debt acquisition. The sale was completed on December 22, 2005. A 50-50 joint venture with Mahindra and Mahindra Limited of India, called

Mahindra Ford India, Limited (MIFL), ended with Ford buying out Mahindra's remaining stake in the company in 2005. Ford had previously upped its stake to 72% in 1998. Chairman and Chief Executive Officer Ford also became President of the company in April 2006, with the retirement of Jim Padilla. Five months later, in September, he stepped down as President and CEO, and naming Alan Mulally as his successor. Bill Ford continues as Executive Chairman, along with an executive operating committee made up of Mulally, Mark Schulz, Lewis Booth, Don Leclair, and Mark Fields.

ENVIRONMENTAL RECORD: FUEL EFFICIENCY: In 2000, under the leadership of the current Ford chairman, William Clay Ford, the Company announced a planned 25 percent improvement in the average mileage of its light truck fleet – including its popular SUVs – to be completed by the 2005 calendar year. This promise, however, remains unfulfilled. In 2003, Ford announced that competitive market conditions and technological and cost challenges would prevent the company from achieving this goal. The United States Environmental Protection Agency (EPA) released its 2005 fuel economy report ranking Ford cars, trucks and SUVs as having the lowest gas mileage of any automaker in America. Researchers at the University of Massachusetts have, however, listed Ford as the seventh-worst corporate producer of air pollution, primarily because of the manganese compounds, 1,2,4-trimethylbenzene, and glycol ethers released from its casting, truck, and assembly plants. The United States Environmental Protection Agency has linked Ford to 54 Superfund toxic waste sites, twelve of which have been cleaned up and deleted from the list.

RECORD OF FORD'S ENVIRONMENTAL DECISIONS: Ford has a mixed record on environmental issues, consisting of both positive and negative reports. In 2003, Ford discarded its goal of improving mileage on sport-utility vehicles by 25 percent by 2005, saying that it would boost mileage of all vehicles instead. However, this plan had neither specific target nor goal. For the 2007 model year, Ford had thirteen U.S. models that achieve 30 miles per gallon or better (based on the highway fuel economy estimates

of the EPA and several of Ford’s vehicles were recognized in the EPA and Department of Energy Fuel Economy Guide for best-in-class fuel economy. Ford claimed to have eliminated nearly three million pounds of smog-forming emissions from their U.S. cars and light trucks over the 2004 to 2006 model years.

ALTERNATIVE FOSSIL FUELS The alternative fossil fuel vehicles, such as some versions of the Crown Victoria especially in fleet and taxi service, operate on compressed natural gas—or CNG. Some CNG vehicles have dual fuel tanks - one for gasoline, the other for CNG - the same engine can operate on either fuel via a selector switch.

CURRENT FORD FLEXIBLE FUEL VEHICLES: • • • • • • • •

Ford F-150 Ford Crown Victoria Ford Taurus Ford Ranger Ford Explorer Mercury Grand Marquis Lincoln Town Car Ford Focus / Focus C-MAX / Ford Focus FFV (Flexible-fuel vehicle).

KEY ECONOMIC FACTORS AND TRENDS AFFECTING THE AUTOMOTIVE INDUSTRY: EXCESS CAPACITY: According to CSM Worldwide, an automotive research firm, in 2007 the estimated automotive industry global production capacity for light vehicles (about 85.4 million units) exceeded global production by about 16.8 million units. In North America and Europe, the two regions where the majority of revenue and profits are earned in the industry, excess capacity was an estimated 17% and 11%, respectively. According to production capacity data projected by CSM Worldwide, significant global excess capacity conditions could continue for several more years at an average of 18.4 million units per year during the 2008-2014 period.

PRICING PRESSURE:

Excess capacity, coupled with a proliferation of new products being introduced in key segments by the industry, will keep pressure on manufacturers' ability to increase prices on their products. In addition, the incremental new U.S. manufacturing capacity of Japanese and Korean manufacturers in recent years has contributed.

CONSUMER SPENDING TRENDS: We expect, however, that a decline in or the inability to increase vehicle prices could be offset at least in part by the long-term trend of consumers' propensity to purchase higher-end, more expensive vehicles and/or vehicles with more features. In the United States, for example, consumers in the highest income brackets are buying more often and are more frequently buying upscale.

COMMODITY AND ENERGY PRICE INCREASE: Commodity prices, particularly for steel and resins (which are our two largest commodity exposures and among the most difficult to hedge), have continued to increase during a period of strong global demand for these materials. In addition, energy prices also continued to increase significantly in 2007. In particular, gasoline prices in the United States rose to levels over $3.00 per gallon during 2007. Although prices have moderated somewhat, they are expected to remain at high levels. This has had an adverse effect on the demand for traditional fulland medium-sized SUVs and trucks in the United States.

OTHER ECONOMIC FACTORS: Additional factors have recently affected the performance of the automotive industry. In the United States, 2007 was a period of a significant contraction in the housing market. As a result, spending on new residential construction declined by 16.9% (after inflation). This adjustment had two effects on automotive sales and revenue – directly, through its adverse effect on GDP growth, and as a contributing factor to potential softer demand for truck sales. Both of these factors may continue to contribute to lower light vehicle sales in the United States. In addition, during the second half of 2007, the United States experienced a subprime mortgage contraction.

Notes:

FORD MOTOR COMPANY

1. Media.Ford.com Press Release: Ford Announces 2007 Fourth Quarter and Full Year Preliminary Results - 24 January 2008 2. Fortune 1000 list for 2008 - based on 2007 sales 3. Money.CNN.com - Ford gets 5 top quality awards - 7 June 2007 4. Edmunds AutoObserver.com - J.D Power: Ford Is a Winner - 7 June 2007 5. Ford Motor Company Information - Ford

6. 7. 8. 9.

Ford fighting to keep its shine Business Week - Is Ford Innovative? Part Two EERE News: EERE Network News Ford Motor Company - Press Release - Ford Motor Company And Southern California Edison Join Forces To Advance A New Transportation And Energy Vision 10. Ford CEO: Bankruptcy 'Not an Option' 11. Ford posts worse than expected quarter loss, record '06 loss - January 25, 2007 12. Ford hit by record $12.7bn loss 13. FinancialTimes.com - Ford takes $2.4bn writedown for Volvo - 24 January 2008 14. Ford Commits $75 Million For India Operations

REFERENCES AND FURTHER READING FORD MOTOR COMPANY • • •

• • • • • • • •

Bak, Richard. Henry and Edsel: The Creation of the Ford Empire (2003) Batchelor, Ray. Henry Ford: Mass Production, Modernism and Design Manchester U. Press, 1994 Bonin, Huber et al. Ford, 1902-2003: The European History 2 vol Paris 2003. ISBN 2-914369-06-9 scholarly essays in English on Ford operations in Europe; reviewed in Len Holden, Len. "Fording the Atlantic: Ford and Fordism in Europe" in Business History Volume 47, #1 January 2005 pp 122–127 Brinkley, Douglas G. Wheels for the World: Henry Ford, His Company, and a Century of Progress (2003) Bryan, Ford R. Henry's Lieutenants, 1993; ISBN 0-8143-2428-2 Bucci, Federico. Albert Kahn: Architect of Ford Princeton Architectural Press, 1993 Flink, James. America Adopts the Automobile, 1895-1910 MIT Press, 1970 Lacey, Robert "Ford: The Men and the Machine" (Heinnemann, London) 0 414 401027 (1986) Levinson, William A. Henry Ford's Lean Vision: Enduring Principles from the First Ford Motor Plant, 2002; ISBN 1-56327-260-1 Kuhn, Arthur J. GM Passes Ford, 1918-1938: Designing the General Motors Performance-Control System. Pennsylvania State University Press, 1986 Magee, David. Ford Tough: Bill Ford and the Battle to Rebuild America's Automaker (2004) .