Ford Motor Company - Business Plan to Obtain Funding For the New Ford Focus

Ford Motor Company was founded in 1903 by Henry Ford and has continuously remained under family ownership since this time. The company developed and implemented assembly line production by the release of the Model T in 1909, and produced planes and vehicles for the Allies in World War II. Ford has operated internationally since 1904, when it opened a branch in Canada to gain access to Commonwealth markets. For the first half of the 21st Century, Ford remained the dominant car manufacturer within the market it had effectively created. In 1956, Toyota exported its first automobile to the United States, and began acquiring market share. In hindsight this was a turning point in the U.S. market, and as the 21st Century drew to a close Ford faced declining market share and had difficulty remaining competitive in the global marketplace. Ford was particularly inhibited by substantial legacy costs—primarily from employee pensions and healthcare benefits—and falling demand for its most profitable lines of vehicles.

In 1996 the company launched the ‘Ford 2000’ initiative to streamline supply lines and reorganize the company’s worldwide operations into a more cohesive unit. In spite of some important successes, including the popular Ford Focus model and a streamlined organizational structure, costs at Ford remained higher than most of the firm’s competitors.

In 2006, Ford posted its biggest operating loss to date: $12.6 billion. This coincided with continued deterioration in market share, with the majority of these losses being captured by Toyota and General Motors. From 1997 to 2007, Ford’s United States market share

plummeted from 25% to 15%. In 2006, Alan Mulally was hired as CEO and took over a company at the precipice of failure. Mulally announced a new restructuring plan in 2006 entitled ‘The Way Forward’, designed to “better align capacity to demand”. At its core, this plan involved the closure of seven assembly plants and strategic reorientation towards ‘One Ford’. Championed by Mulally, this strategy focuses on creating a standard Ford personality which is seen and felt within every automobile produced by the company. In addition, the plan entails standardizing chassis worldwide and a greater focus on the core Ford nameplate. As a part of this plan, Ford mortgaged all of its assets—both physical and intellectual property—in December 2006 for a $23.4 billion line of credit. While originally seen as a risky and potentially desperate move, this timely acquisition of capital has made Ford the most stable of the Big Three carmakers. The company also divested some of its non-Ford brands during this time, selling Jaguar and Land Rover to Tata Motors for $2.3 billion in 2008. Ford is also currently attempting to sell Volvo, which it purchased in 1999 for $6.5 billion.

Business Model and Market Overview

Ford Motor Company currently employs approximately 213,000 workers worldwide and markets vehicles under four primary brands: Ford, Lincoln, Mercury, and Volvo. The firm is divided into two departments, Automotive and Financial Services. Ford Credit offers

vehicle financing to both retail consumers and to dealers. Approximately forty percent of

vehicles sold by Ford, Lincoln, and Mercury dealerships within the United States were financed by Ford Credit in 2008, a number which has remained stable in the past three years.

In Europe, the only other region with reported data, this figure has remained steadily around 27%. Conversely, financing for wholesale purchases by dealerships is nearly exclusively (98%) done by Ford Credit in Europe whereas in the U.S. this number is slightly below eighty percent. Ford Credit also plays a role in financing dealership purchases of real estate and other larger capital expenditures by the company and its affiliates. Ford’s automotive segment designs, manufactures, and services cars, trucks, SUVs, and vehicle parts. This sector is primarily broken down by region: North America, South America, Europe, and Asia Pacific Africa. The only exception to this regional model is Volvo, which operates as a separate subsector and manages all Volvo sales worldwide.

Ford retail sales operate under a dealership model, where dealerships sign exclusive contracts with the company to sell Ford vehicles. At the close of 2008, Ford operated nearly 3,800 dealerships within the United States. Approximately half of these dealerships sold only the Ford brand, with another quarter selling Ford, Lincoln, and Mercury.

Production of vehicles for Ford typically takes within 20 days from point of order to

shipping, meaning the firm faces little to no backlog or inventory buildup. Production is

typically higher in the first two quarters to accommodate peak seasonal demand, which

occurs in the spring and summer.

Ford’s Statement of Mission, Values and Guiding Principles

Mission

Ford Motor Company is a worldwide leader in automotive and automotive-related products and services as well as in newer industries such as aerospace, communications and financial services. Our mission is to improve continually our products and services to meet our customers’ needs, allowing us to prosper as a business and to provide a reasonable return for our stockholders, the owners of our business.

Values

How do we accomplish our mission is as important as the mission itself. Fundamental to success for the company are these basic values:

- People: Our people are the source of our strength. They provide our corporate intelligence and determine our reputation and vitality. Involvement and teamwork are our core human values.

- Products: Our products are the end result of our efforts, and they should be the best in serving our customers worldwide. As our products are viewed, so are we viewed.

- Profits: Profits are the ultimate measure of how efficiently we provide customers with the best products for their needs. Profits are required to survive and grow.

Guiding Principles

- Quality comes first: To achieve customer satisfaction the quality of our products and services must be our number one priority.

- Customers are the focus of everything we do. Our work must be done with our customers in mind, providing better products and services than our competition.

- Continuous improvement is essential to our success. We must strive for excellence in everything we do: in our products, in their safety and value, and in our services, our human relations, our competitiveness and our profitability.

- Employee involvement is our way of life. We are a team. We must treat each other with trust and respect.

- Dealers and suppliers are our partners. The Company must maintain mutually beneficial relationships with dealers, suppliers and our other business associates.